Friday
(0)I suppose it had to happen. Italian legislators, no doubt hoping to look useful in the wake of the near-collapse of Italian food group Parmalat, say they need new laws to prevent the kind of abuses that have dragged the firm into the mire.
Yep, that's the spirit. What we need is a "overhaul", a "sweeping new set of powers", a new super-agency with "wide-ranging" powers to prevent such things happening again.
They never learn, do they? If the public authorities had been doing their job in the first place, ie, enforce the laws preventing fraud and theft, then Parmalat would be chiefly known for its milk cartons, and not as a firm which is doomed to be known as Europe's Enron. But I guess where there's muck, there's brass, as we Brits say. The firm may be teetering on the brink, but at least politicians can see the bright side and pass some impressive new laws and bolster their wonderful reputations.
I said pretty much the same thing about Enron. What magic did the SEC provide in curtailing fraud at Enron, what with all the 10-k's and 10-q's etc etc? If one searches the filing data base one is subjected to an avalanche of information no one could hope to process over a long period much less in the relatively short periods one is allowed in investment decision making.
And yet the cry is not "I guess it didn't work so let's chuck the whole useless structure" it was "Let's have a lot more of the same". And we got Sarbannes-Oxley and a whole host of new regulations of, and requirements by, the accounting profession that is going to do very little but drive up fees.
After a while one realizes that the government isn't providing protection, they are providing the illusion of protection. Everyone's happy as long as the public is plowing their 401k money into the market and no one really understands what is happening. Create the stream of capital, and provide a set of regulations to give the 'investor' peace of mind that someone is looking out for them and the economy cranks along. But regulations and 'pro-active' laws that look to prevent conduct ultimately do very little in changing malfeasance IMO and the investor is deluded into thinking everything is monitored (in what is ultimately an unmonitorable situation) and they get to blank out on the decisions they make and bureaucrats solidify their position accordingly.
Posted by toolkien at January 16, 2004 02:34 PM
Ah, the old, "Don't just sit there, do something," response. It just looks better when a legislator does something, namely legislate, in response to a crisis. Lord knows they all pay themselves well enough, whichever country they represent.
The complicated schemes that Enron and Parmalat have engaged in are only possible when you have complicated rule schemes. We have well passed the critical mass of regulations where a clever person can make lots more money by manipulating the rules rather than by creating a product. To this day I'm not entirely certain what Enron actually did as a business (aside from ripping off former California Governor Grey Davis blind, but that's another gripe).
Posted by gamer at January 16, 2004 04:30 PM
Agree with the sentiment that complicated financial crime is only possible in an environment of overly complicated regulation. I also love the idea that fraudsters will stop engaging in fraud just because it has been made illegal. The folks at Parmalat intended to make billions disappear and where willing to go to extraordinary lengths to do so. Well they would the stakes where enormous. What are the chances that the Italian (or any other country's) legislature would be able to stop determined fraudsters with billions at their dissposal? Zero.
Posted by Lorenzo at January 16, 2004 06:56 PM
