Crisis panel probes bank "window dressing"

in Banks
May 5th, 2010

Financial Crisis Inquiry ComissionThe Financial Crisis Inquiry Commission, which is looking into the causes for the 2008 economic crash, today questioned former executives from the investment bank Bear Stearns (sold to J.P. Morgan in a firesale after a run on the bank) and explored the open-secret of how Wall Street banks legally fudged their quarterly books to dress up their financial statements.  Law Professor Cornelius Hurley, a former counsel to the Federal Reserve Board of Governors and now director of the Morin Center for Banking and Financial Law, says that to deal with such “window dressing” it is time to consider borrowing a principle from tax law.

“Namely, if a pattern of financial and accounting maneuvers has no ‘economic substance’ other than to misstate the firm’s financial condition, it should be per se securities fraud.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

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