Reforms won’t solve financial problems
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TEXT OF INTERVIEW
Steve Chiotakis: The capitol today will be paying tribute to the late Senator Robert Byrd. He passed away just a few hours ago after taking ill over the weekend. And now financial reform legislation could be affected. Massachusetts Sen. Scott Brown — who voted for the original Senate bill, now says he’s wavering on a compromise bill passed last week. Without Sen. Byrd’s “yes” vote, and if Brown votes “no,” the bill comes up short of the 60 votes needed to bypass debate and move toward final passage.
No matter, says Fortune Magazine’s Allan Sloan. The financial regulations being proposed won’t do much to avoid another financial crisis. He’s with us now to talk about it. Good morning, Allan.
Allan Sloan: Good morning, Steve.
Chiotakis: We saw, Allan, after the corporate accounting scandals in the last 10 years, that Congress passed Sarbanes–Oxley, right? It was supposed to clean up financial reporting at public companies. I mean, that was big reform. Did it work?
Sloan: Well, it sounded like big reform and it worked to a very small extent. And as I’m sure some of us know, after today it may not exist because the Supreme Court may throw it out very soon. But it didn’t really solve the problem. There were all these penalties, where if a company had to report its earnings, there were supposed to be dire consequences and nothing really happened. The best part about Sarbanes–Oxley was if you were an accountant or a consultant, you made a lot of money.
Chiotakis: All right, so you don’t think Sarbanes–Oxley did much. Do you think these proposed financial regulations will stand the test of time?
Sloan: No. I don’t think they will, except for possibly the consumer agency. I think it will be seen as tinkering around the edges. And when the next crisis appears, which I predict will be within the next 10 years, we’ll discover that as usual we adopted laws that didn’t really solve the last problem and are not solving the new one.
Chiotakis: Fortune Magazine’s Allan Sloan with us this morning. Allan, thanks.
Sloan: You’re welcome, Steve.
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