Statement by William K. Black before the House Committee on Financial Services

Statement by William K. Black before the House Committee on Financial Services

William Black, never one to mince words or beat around the bush tells it how it is.

Chairman Frank, Ranking Member Bachus, and Members of the Committee:

Thank you for your invitation to discuss public policy issues arising from Lehman’s failure. I will address the six issues you asked that I comment on in your letter of invitation.
1.
The extent to which corporate governance should be enhanced to appropriately manage firm risk. Please share your views regarding the communication, knowledge and understanding among risk managers, Boards of Directors and senior management.
2.
The role of the SEC as Lehman’s primary regulator in oversight, examination and enforcement in advance of Lehman’s bankruptcy filing, and the role of the other government agencies, including the Federal Reserve Bank of New York (FRBNY), that were monitoring Lehman during the crisis.
3.
The relationship and means of communication, especially formal and informal information sharing, between the SEC and FRBNY as Lehman’s financial condition deteriorated as well as between Lehman, the SEC, the Treasury Department, the Board of Governors Federal Reserve, and the FRBNY.
4.
Please reflect on the appropriateness of accounting practices such as Repo 105 or 108 and the adequacy of the disclosure of such accounting practices.
5.
The quality of Lehman’s Management Discussion and Analysis disclosures in its public filings for the 2007 reporting periods.
6.
Other issues that you deem relevant to the public policy issues raised by the Lehman Report.

I begin with a short description of my background that is relevant to your questions. My primary appointment is in economics. I have a joint appointment in law. I am a white-collar criminologist. My research specialization is financial fraud by elites and financial regulation. I was a senior regulator during the S&L debacle.