Government Oversight of Financial Institutions

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Government Oversight of Financial Institutions

  1. 1. Should there be government oversight of banks and financial industries, or would a new accounting standard be enough to stop a recession?<br />By Erica Bennett<br />
  2. 2. Table of Contents<br />History of Government Oversight Laws<br />Glass-Steagall Act of 1933 <br />Financial Services Modernization Act of 1999 <br />History of Sarbanes-Oxley Act of 2002<br />What is Sarbanes-Oxley<br />Why so important<br />Is it perfect<br />
  3. 3. History of Government Oversight Laws<br />What is the Glass-Steagall Act of 1933?<br />Named for Senator Glass (D-VA) and Congressman Steagall (D-AL)<br />Removed the conflict of interest’s in banks.<br />Established FDIC (PBS.org)<br />
  4. 4. History of Government Oversight Laws (cont.)<br />Signed into law by President Roosevelt.<br />Part of Roosevelt’s New Deal<br />Helped to pull United States out of Great Depression<br />New Deal changes took place from 1933-1938 (theindependent.uk)<br />
  5. 5. History of Government Oversight Laws (cont.)<br />Why was this law important?<br />Removed conflict of interest’s in banks<br />Made banks choose to be a lender or underwriter, not both<br />Stabilized the bank industry<br />What would have happened without it?<br />Speculation that the Great Depression would have lasted longer<br />
  6. 6. History of Government Oversight Laws (cont.)<br />What is the Financial Services Modernization Act of 1999?<br />Also know as Gramm-Leach-Bliley Act<br />Senator Gramm (R-TX), Representative Leach (R-IA), Representative Bliley, Jr, (R-VA)<br />Allowed banks to merge with investment companies<br />Enacted by President Clinton in 1999<br />
  7. 7. History of Government Oversight Laws (cont.)<br />Why was this law important?<br />Banks can offer savings and investment accounts<br />Allows for large financial companies to merge<br />Citigroup would not have survived without it<br />What would have happened without it?<br />Banking industry would have remained the same<br />
  8. 8. Sarbanes-Oxley Act of 2002<br />What is Sarbanes-Oxley (SOX)?<br />Named for Senator Sarbanes (D-MD) and Congressman Oxley (R-OH).<br />Created Public Company Accounting Oversight Board (www.sarbanes-oxley.com)<br />Made financial reports more transparent<br />Also known as Public Company Accounting Reform and Investor Protection Act<br />Also known as Corporate and Auditing Accountability and Responsibility Act<br />
  9. 9. Sarbanes-Oxley Act of 2002<br />Why so important?<br />Supposed to stabilize stock market after collapse of Enron, Tyco Int., Adelphia, Peregrine Systems, WorldCom, and Arthur Anderson<br />Nobody was overseeing accounting practices until SOX was enacted<br />Prevented companies from reporting traded stocks as revenue<br />Stopped false revenue and expense reporting<br />Made publicly traded companies transparent and accountable<br />
  10. 10. Sarbanes-Oxley Act of 2002<br />Is it perfect?<br />SOX is time consuming and expensive to implement<br />Helped speed recession by decreasing investor confidence<br />Makes the CEO liable for company downfall<br />This might slow company growth<br />Did not help prevent accounting shortfalls in:<br />Bear Sterns, Lehman Bros, AIG or Merrill Lynch (www.aei.org)<br />
  11. 11. Sources <br />Frontline. “Frontline: The wall street fix: Mr. Weill goes to Washington: The long demise of Glass-Steagall | PBS.&quot; PBS. Frontline, 8 May 2003. Web. 10 Nov. 2009. &lt;http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html&gt;. <br />Cornwell, Rupert . &quot; The Big Question: What was Roosevelt&apos;s New Deal, and is something like it needed today? - World Politics, World - The Independent.&quot; The Independent | News | UK and Worldwide News | Newspaper. The Independent World, 17 Sept. 2008. Web. 10 Nov. 2009. &lt;http://www.independent.co.uk/news/world/politics/the-big-question-what-was-roosevelts-new-deal-and-is-something-like-it-needed-today-932942.html&gt;. <br />
  12. 12. Sources <br />&quot;Gramm-Leach-Bliley Act of 1999.&quot; United States Senate Committee on Banking, Housing and Urban Affairs : Home. Senate.gov, 1 Nov. 1999. Web. 10 Nov. 2009. &lt;http://banking.senate.gov/conf/&gt;.<br />&quot;Sarbanes-Oxley - Financial and Accounting Disclosure Information.&quot; Sarbanes-Oxley - Financial and Accounting Disclosure Information. Sarbanes-Oxley, 19 Nov. 2002. Web. 10 Nov. 2009. &lt;http://www.sarbanes-oxley.com/section.php&gt;.<br />
  13. 13. Sources <br />Gingrich, Newt , and David W. Kralik . &quot;Articles & Commentary.&quot; Welcome to AEI. San Francisco Chronicle , 5 Nov. 2008. Web. 10 Nov. 2009. &lt;http://www.aei.org/article/28893&gt;.<br />

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