The combo of CNBC and Fortune, while not quite a WSJ editorial board/Forbes sandwich, doesn’t exactly make you think McClure’s.
Okay, it still doesn’t, but all the same, applaud CNBC anchor Becky Quick for her column taking prosecutors to task for not bringing cases against Wall Street.
It’s always good to talk to Bill Black, the law professor and former regulator who isn’t afraid to lose a dinner-party invitation or two for speaking the unvarnished truth, as Quick does here. If you still haven’t seen his opening statement to Congress a couple months ago on the fraud at the heart of the crisis, now’s the time to watch it:
Here’s Black as quoted by Quick:
“Nowadays we have zero indictments and arrests at the senior ranks,” bemoans Bill Black, a law professor at the University of Missouri at Kansas City. “Fundamentally, what’s happened is the regulators have deserted the process. They are completely out to lunch.”
Meantime, the SEC (which, to be sure, can only bring civil cases) is going after journalists and sources trying to expose fraud the SEC should be uncovering.
Quick is dead on when she talks about how the anger and disillusionment in the country is being fed by the authorities’ inaction, and she all but calls out Lehman for fraud (she should have asked Black for a quote on that):
Sarbox requires every public company’s CEO and CFO to sign off on the accuracy of their accounting statements, and it provides criminal penalties for “knowingly or willfully” providing false certifications. And it’s incredibly relevant today, because many of the biggest failures during the financial crisis involved financial shenanigans.
Take Lehman Brothers. We now know that Lehman was dressing up its books using a fancy accounting trick called “Repo 105” transactions; essentially, those transactions kept billions of dollars of debt off its balance sheet and allegedly helped the firm look far healthier than it was. Former Lehman CEO Dick Fuld now says he knew nothing about the transactions.
Even if Fuld really didn’t know about Repo 105, his CFOs surely did.
Quick misses the big fact that prosecutors went after two Bear Stearns executives, fumbled the case badly, and lost.
And this isn’t exactly an original column. But it’s nice all the same. Especially when it comes from a somewhat unexpected source. Regulation and prosecution don’t happen in a vacuum, and journalists have a big role in creating the environment for enforcement.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.