subject: _:nodeaaf09b64d1ad4d8c5cc1e8fafde28ab
obj: "Facebook0Twitter0LinkedIn0Google+0Pinterest0The Securities and Exchange Commission announced  Monday it had begun an inquiry into two dozen financial companies to  determine whether they followed accounting practices similar to those  recently disclosed in an investigation of Lehman Brothers.Where on earth has the SEC been?It\u2019s now clear Lehman Brothers\u2019 balance sheet was bogus before the  bank collapsed in 2008, catapulting the Street and the world into the  worst financial crisis since 1929. The Lehman bankruptcy examiner\u2019s  recent report details what just about everyone on the Street has known  since the firm\u00A0imploded \u2013 that Lehman defrauded its investors. Even Hank  Paulson, in his recent memoir, referred to Lehman\u2019s balance sheet as  bogus.In order to look like it could borrow $30 for every dollar of its own  money, Lehman shifted liabilities off its books at the end of each  quarter. Its CPA, Ernst and Young, approved of this fraud against the  advice of its own whistle blower, whom Ernst and Young fired.Lehman\u2019s practices couldn\u2019t have been all that different from those  of every other big bank on the Street. After all, they were all  competing for the same business, and using many of the same techniques.  Lehman was just the first to go under, causing a financial run that led  George W. to warn \u201Cthis sucker could go down\u201D unless the federal  government came up with hundreds of billions to bail out the others.In other words, the TARP covered the other bankers\u2019 assets and asses.We now know, for example, Goldman Sachs helped Greece hide its public  debt and then placed financial bets that Greece would default, using  credit-default swaps to avoid risking its own capital. It\u2019s the same  tactic Goldman used for (and against) American International Group  (AIG): Hide the ball, and then bet against the ball and fob off the risk  to investors and taxpayers, using derivatives to remove the risky  tactics from the balance sheets. Even today no one knows the fair value  of the complex derivatives underlying these and related maneuvers, which  is exactly the point.Congress is now struggling to come up with legislation to stop this  from happening again. And the Street is struggling to stop Congress. As  of now, the Street\u2019s political payoffs seem to be working. Proposed  legislation still allows secret derivative trading in foreign-exchange  swaps (similar to what Goldman used to help Greece hide its debt) and in  transactions between big banks and many of their corporate clients (as  with AIG).But wait. We already have a law designed to stop this sort of fraud.  It\u2019s called the Sarbanes-Oxley Act of 2002.    (adsbygoogle = window.adsbygoogle || []).push({}); Think back to the corporate looting scandals that came to light  almost a decade ago when the balance sheets of Enron, WorldCom, and  others were shown to be fake, causing their investors to lose their  shirts. Nearly every major investment bank played a part in the fraud \u2014  not only advising the companies but also urging investors to buy their  stocks when the banks\u2019 own analysts privately described them as junk.Sarbanes-Oxley \u2013 Sarbox, as it\u2019s come to be known \u2013 was designed to  stop this. It requires CEOs and other senior executives to take personal  responsibility for the accuracy and completeness of their companies\u2019  financial reports and to set up internal controls to assure the accuracy  and completeness of the reports. If they don\u2019t, they\u2019re subject to  fines and criminal penalties.Sarbox is directly relevant to the off-the-balance-sheet derivative  games the Street played and continues to play. No bank CEO can  faithfully attest to the accuracy and completeness of its financial  reports when derivatives guarantee that the reports are incomplete and  deceptive.So where has the SEC been?I was on a panel a few weeks ago with a former chair of the  Securities and Exchange Commission who was asked why the commission has  so far failed to enforce Sarbox against Wall Street. He had no response  except to mumble that legislation is meaningless unless adequately  enforced. Exactly.Bottom line: While financial reform is needed, there\u2019s no reason to  wait for it. Sarbox is already there. And even if financial reform is  enacted without loopholes, there\u2019s no reason to think it will be  enforced if laws already on the books, such as Sarbox, aren\u2019t.(adapted from my column in The American Prospect)by Robert ReichThis article first appeared on Robert Reich\u2019s Blog. Republished with permission"@en-us