Fascinating discussion Friday on CNBC about the falsification of Lehman Bros. balance sheets prior to their collapse. The fraud was completely missed by regulatory agencies despite extensive government oversight by the SEC and the NY Federal Reserve, who had regulators inside Lehman after the Bear Stearns meltdown. Sarbanes-Oxley, put into place after the Enron scandal to ensure that such a thing never happened again, failed to keep Lehman honest, and numerous other rules and regulations had no effect either. Even Ernst and Young, Lehman’s accounting firm, still stands by Lehman’s practices which apparently amount to outright fraud.
Who investigated and discovered the problems? Short sellers. Could it be that those with an economic interest are in many ways more effective regulators than the government? (Not to say we don’t need some government regulation, to be sure, so don’t even go there.)
Watch the video, and let me know what you think.