Corporate Governance

Secretary Paulson: We Thought We Knew You

By Jason Cowart

Welcome to the party Secretary Paulson!

In a speech yesterday by the Treasury Secretary concerning the sub-prime mess, and the recommendations of the President's Working Group on Financial Markets, the Secretary sounded nothing like himself.  Instead of his familiar mantra that all problems are somehow caused by burdensome financial disclosure obligations and the threat/reality of private/public regulation, the Secretary argued that "stronger transparency and disclosure" was required, that "the challenges of complexity were exacerbated by opacity," and that "[t]he best antidote to opacity is transparency and disclosure." 

We couldn't agree more, we just didn't know you were on our side.

The problem, of course, is that Secretary Paulson isn't on our side (or those of investors).  When securities-related disasters occur (whether the product of undisclosed Wall Street conflicts of interest, Enron-style accounting frauds, or misrepresented lending policies) policymakers like the Secretary are fond of giving speeches about the benefits of transparency and robust regulation.  The problem is that when those stories recede from the headlines, they decry the burdensomeness of complying with transparency-related laws and the costs associated with enforcement of those laws. 

You can't have it both ways.

Secretary Paulson's comments yesterday were on the money.  Lets just hope he is singing the same tune 30 days from now.  We suspect not.

Full post as published by PomTalk on March 14, 2008 (boomark / email).