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July 15, 2012

More financial scandals!

There were two articles in today’s Chicago Tribune: “Wrongdoers must pay price” by Phil Rosenthal and “Peregrine, MF Global raise oversight questions” by Ameet Sachdev and Peter Frost.  The both raise questions about regulations.  Industry funded  regulators (watchdogs) are involved in many of the financial scandals.  I wonder if industry funded organizations were intended to reduce government regulations? 
Rosenthal’s column is clearer in defining the issues.  He quotes Rep. Brad Miller, D-NC a member  of the House Committee on Financial Services.  “What is disturbing is just how pervasive cheating and fraud have become.  It appears to be part of the culture of the industry.” Rosenthal continues “It all bleeds together after MF Global’s vaporized assets, bankers’ rigging of the London Interbank Offered Rate (or Libor), dicey bets by JP Morgan Chase traders and the subprime-mortgage mess.  It’s a wound that won’t heal. until it’s treated.”
Quoting Miller, the article continues “We now have heard so much that cannot be excused…”.  “there has been strong evidence of pervasive fraud in the conduct that led up to the financial crisis…”
Rosenthal the cites results os survey of financial workers that indicate a significant portion believe that “…corrupt behavior could fuel success in business…”.
He quotes Francine McKenna, a Chicago expert on the accounting and auditing: “… the financial crisis was like the tide going out.  A lot of buried problems were exposed.” (Think Madoff).  McKenna asks if these are instances we know of “…think about all the other things they have been telling us…””We are seeing systematic abuse.”
“McKenna thinks things might change  ‘if the persecutors were seriously dealing a blow to individuals, not to companies…”
We read that the Europeans are in the condition they are in because they do not have the centralized institutions we have.  Does that indicate that we would be in better financial shape if our institutions were not governed by their industry?
These articles raise many questions that deserve serious consideration.

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