Banking Law

Much ink has been spilled over the last few days about the settlement between the rating agencies and NY AG Andy ("Little Eliot") Cuomo. Francine McKenna of re: The Auditors asks "When Will They Call CR On Auditors Too?" By "CR" she means "circular reasoning," and she lays out the arcs of the circle sequentially.

There is also an unholy alliance between the rating agencies, their auditors and the companies bonds they rate and the auditors of these companies.  The Big 4 are all over all of it. 

And yet, no regulator or congressman or other politician will raise the issue of these conflicts.

And what about the fact that the auditors are paid by the companies whose financial statement integrity,  fairness, and accuracy they rate? Somehow that's ok? 

If the mortgages were not being valued properly by companies and banks, who is the final judge?  The Big 4.

If the rating agencies were not following appropriate due diligence policies and therefore inflating fees based on bogus or conflicted business practices, who is the final judge?  Their auditors, the Big 4.

And what about the bond insurers?  Who audits them?  The Big 4.

And who audits the Treasury and Department of Justice?  The Big 4.

That's what's known in technical jargon as a "daisy-chain," and not the fun XXX kind, either. Of course, the Big 4 will tell you that their strict conflict-of-interest policies and "Chinese Walls" (of both the Mandarin and the Cantonese varieties) assure that any potential conflicts of interest are adequately minimized or at least disclosed and approved. The problem is, however, that the "gatekeeper" has too many fingers in too many pieces of the pie. If the Big 4 audit all the players and get paid by all of them, to boot, should they ultimately be held accountable to some degree now that the mortgage securitization chickens have come home to roost?

At least, I think that's what Francine is asking. I may have been distracted by a portion of one of her later posts from the Compliance Week Annual Conference in D.C., which she's attending as a member of "the media."

Blogging from the bar on Tuesday night.  Pretty full.  Can't even get a seat at the bar itself.

Got hit on by some Republican, former Bush Cheney staffer, now lobbyist and TV pundit.   Hmmm.  Wrong end of the political spectrum but he was tall and cute.  And he said he was single.

Hmmm...it's late Wednesday afternoon at the time I bang this out (so to speak) and I haven't seen a subsequent blog post by Francine. Maybe she got lucky and ended up with some righteous Carville-Matlin action. After all, even if you're an auditor (or an ex-auditor), the primary rule of life still holds: girls just wanna have fun.