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Administrative Law

Lessons Learned From Enron: Zip, Zero, Nada, Wall Street Journal Says

Posted Oct 29, 2008 2:58 PM CDT
By Martha Neil

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What a difference more than six months of financial crisis can create. After the fall of the once-fabled Enron energy company and the federal conviction of 22 of its former employees, officials crowed a few years ago that its failure had helped strengthen regulatory protections.

Maybe so, as evidenced by the enactment of Sarbanes-Oxley. But the current economic debacle shows that appropriate regulatory and executive oversight is still desperately needed, reports the Wall Street Journal (sub. req.).

"Today's financial crisis has shown what a real debacle looks like. And it has made clear that executives' duties to public companies have, if anything, been loosened, not reinforced," the newspaper writes. "What is worse, the post-Enron crackdown appears not only to have failed to stop flagrant corporate risk-taking, but to have lulled Washington to sleep."

Even now, as efforts to tighten the regulatory reins and enforce apparent violations create more work for lawyers on both sides of the aisle, additional apparent loopholes are being spotted in the nation's rapidly changing financial oversight scheme.

Congressional Democrats, for instance, are complaining to the U.S. Treasury secretary that the recent $700 billion taxpayer bailout is being used, in part, to fund so-called golden parachute payments to executives departing from struggling banks, reports Bloomberg.

And, at the same time, it turns out that $160 billion in taxpayer money being paid into bank coffers to help make credit available is being funneled to the strongest, rather than the weakest, and thus encouraging bank consolidation, another Bloomberg article explains.

That situation has drawn fire from at least one prominent House Republican, Minority Leader John Boehner of Ohio, who "today questioned the program, saying in a letter to Paulson that `funds made available under the economic rescue package should not be used to pay for bank acquisitions, raises, and executive bonuses,' " the news agency writes.

Related coverage:

Bloomberg: "Defense Lawyers See Bonanza From Lehman, Bear, Other Collapses "

New York Law Journal: "Criminal Prosecutions Predicted to Surge Over Financial Crisis"

ABAJournal.com: "US Prosecutors in NY and NJ Add Lawyers to Probe Financial Firms"

ABAJournal.com: "3 Fed’l Grand Juries Probe Lehman Bros."

ABAJournal.com: "Despite S&L Debacle Decades Ago, Most Hard-Hit States Didn’t Amp Up Regulation"

ABAJournal.com: "As Banks Reel, Regulation is Suddenly a Hot Topic"

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