The Securities and Exchange Commission’s civil charges against Goldman Sachs & Co.might be a legislative spur similar to what happened in 2002 that preceded the sweeping Sarbanes-Oxley Act designed to improve the reliability of U.S. public company accounting and auditing.
The SarbOx legislation, ignited initially by the Enron accounting scandal, was not going great guns in Congress until Worldcom came along. After that big company’s accounting fraud was revealed, Congress acted swiftly to pass the law commonly referred to as SarbOx.
It’s a law that was controversial from its inception and remains so today. One Lonon-based financier quipped that statues of the two legislators (then-Sen. Paul Sarbanes and then-Rep. Michael Oxley) who sponsored the bill should be erected in the City of London, because of the alleged number of company listings it chased from New York and to London.
This time, of course, the pending legislation is the reform of financial regulation after the credit crisis and financial meltdown. There’s been controversy about the treatment of derivatives, among other things and differneces between the two major political parties. The Goldman charges, which the investment bank firmly denies and vows to fight, might accelerate the proceedings and make for easier sailing for the Democratic-based view of the legislation.
Politicians were quick to comment after the Goldman charges. Said Senate Banking Committee Chairman Christopher Dodd, D-Conn., “We don’t need to know the outcome of this case to know that the opaque nature of unregulated asset backed securities fueled the financial crisis.”