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The Height of Hypocrisy or Why America Should Be So Outraged

Posted by Larry Doyle on October 27, 2010 8:26 AM |

Not that we needed any more reason to castigate those who have driven our economy and our nation into a ditch but the story I bring you this morning provides us just that.

I am well past the point of surprise in finding shock value in stories exposing financial charades. That said, I hope I never lose the feeling of complete and total indignation in shedding light on those involved in the charades and others who would provide cover for it. To wit, count me as extremely pissed off this Wednesday morning. CFO Magazine highlights the hypocrisy embedded in our political and financial system with its report, West Wing Accounting:

On Monday, conference attendees in New York were spectators to a simulated White House war room exercise. The object of the exercise wasn’t Iraq or Afghanistan, however, but the economy: specifically, a scenario in which presidential advisers had to consider the bailout of a U.S. state that was just two days away from defaulting on a $1.5 billion bond.

Cooked up by the Economist magazine for its annual Buttonwood Gathering, the make-believe exercise starred a panel of economic and political heavy hitters who had faced real-world economic threats in the past. Included were former Treasury Secretary Robert Rubin, former Council of Economic Advisers chairs Laura Tyson and Glenn Hubbard, and one-time Federal Reserve governor Laurence Meyer.

As the group debated the possibility of a bailout and its immediate and long-term effects, one item seemed so fundamental to the discussion that only Rubin mentioned it, and then as a foregone conclusion. The item was “proper” accounting. “No more tricks” and more information for investors was how he put it in a very matter-of-fact way, while listing other, more-stringent requirements that the fictitious state (called New Jefferson) would have to follow should a bailout be approved.

Are you kidding me? Prior to even discussing the implications of a bailout, how about an admission of self-guilt and personal indictment by those in the room as to their involvement in these ‘tricks.’ Who in the system devised the ‘tricks’? Who in the system allowed the ‘tricks’? Who in the system has profited from the ‘tricks’? Who in the system is picking up the cost of the ‘tricks’? Well we know the answer to the latter question BUT who specifically are the individuals associated with the tricks and the profits? Round ’em up and ‘hang ’em high’!! Name, rank, and serial number please. To the extent that the ‘tricks’ involved illegal activities– and don’t think they didn’t–appropriate penalties MUST be assigned and collected, including time in the pain chamber (jail).

When the controversial suggestion of forcing New Jefferson into voluntary receivership was made, a chief financial officer was drawn into the conversation. Several panelists recalled how in 1995, when Washington, D.C., was in fiscal ruins, Congress set up a financial control board to temporarily take over management of the district. At that time, Congress appointed Anthony Williams as CFO of the District of Columbia and charged him with leading the recovery.

The need for pristine bookkeeping was further emphasized when Tyson pointed out that the federal government’s “tool kit” for assuring payback of its simulated bailout funds included adherence to generally accepted accounting principles or another accepted method of accounting that provided “transparent” financial reporting.

What a novel concept? Screw Laura Tyson. Where were she and others when the lack of transparency was being promulgated? The American taxpayer is supposed to take this bulls&^% sitting down? Accounting tricks and lack of transparency is merely standard operating procedure until the need for a bailout comes along?

Is it any wonder why the Tea Party movement is so strong and the ‘throw the bums out’ mentality is sweeping our nation?

Indeed, beneath the simulation’s insightful economic and political discourse lay a basic truth: the importance of sound accounting has arrived, even in the West Wing.

No, the writer is wrong. The importance of sound accounting has NOT arrived. The fact is the importance of sound accounting NEVER left. The importance of accountability in exposing those who allowed the tricks and who profited from them has not arrived either. That importance of accountability is LONG OVERDUE!!

Americans will voice their indignation on this front next Tuesday.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

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