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Herz Implores “Golden Rule” to Fix Market Woes

Tammy Whitehouse | September 23, 2008

No doubt Bob Herz, chairman of the Financial Accounting Standards Board, left a few folks squirming in their seats with his frank assessment of how the markets managed to arrive—again—at a state of crisis. At a recent PricewaterhouseCoopers conference, Herz pulled no punches in describing how market players seem to have a flashcube memory about how chaos erupts.

From the savings-and-loan crisis of the 1980s to the dot-com burst and financial reporting scandals of the new millennium, there are lessons to be learned, said Herz. “But, unfortunately, some of the lessons seem to be forgotten and have to be ‘relearned’ again and again multiple times,” he said.

Herz laid blame in no one place, but pointed to a variety of causes for the current crisis—including overzealous lending and securitization, selective ignorance of risk and liquidity problems, engineered accounting, and “black holes” in the regulatory...

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