Wednesday, August 23, 2006

The Fed Pause - Its Not Just About Economic Growth

Yet in what is shaping up to be one of the greatest ironies of legislation gone awry the Sarbanes-Oxley bill, originally designed to protect consumers from such financial fiascos as Enron and Worldcom may be preventing banks from setting aside sufficient loan reserves against these possible defaults. In a recent article entitled "Has Congress Sparked a Banking Crunch?" MoneyCentral columnist Jim Jubak noted that "the Sarbanes-Oxley accounting reforms have made it just about impossible for banks to prepare for the credit cycle's turn. Accountants and the Securities and Exchange Commission (SEC) are applying Sarbanes-Oxley in a way that forces banks to cut reserves for delinquent and bad loans just when they need to put money aside for the rainy days that will come."

The Fed Pause - Its Not Just About Economic Growth

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