Alumni Bulletin - Winter 2009 - (Page 9)

ON CAMPUS business & economics LATVIAN MINISTER DESCRIBES SOURCE OF REAL FREEDOM HOUSE OF CARDS In Lynn Turner’s estimation, nearly everyone is responsible for the economic crisis, but the former chief accountant of the U.S. Securities and Exchange Commission contends that the most reprehensible are executives who approved subprime loans. “We call them subprime because they are lousy loans,” Turner said. “Why did business executives in this country decide to make trillions of dollars of lousy loans?” Because they personally benefited, he asserted. Executives were well compensated for granting risky loans and, because they repackaged and sold the loans, they did not face repercussions. Turner expounded on subprime loans in a meeting held during his ofﬁce hours. He set up residence at Lehigh for two weeks this past November, during which he taught a senior-level accounting class for the College of Business and Economics. His lectures emphasized responsible accounting and provided context for the economic situation. “There is a segment of business executives that lost sight that they had an obligation to their investors, their employees, and their communities,” Turner said. These executives were not the ﬁrst Turner has seen who have allowed greed to cloud their moral compass. During his tenure at the SEC from 1998 through 2001, Turner advocated for regulations to prevent accounting firms from receiving payment for ﬁnancial consulting from the businesses they audit. Congress initially passed a watered-down version of the regulations in 2000. But in 2002, they increased regulations with the Sarbanes-Oxley Act in response to several corporate scandals. “Enron and WorldCom and the other corporate scandals were all symptomatic of a Wall Street run amok,” Turner said. “Large amounts of money were seen to justify any means that people took to get it. It’s become very evident that there was a similar problem with the Wall Street firms that have failed, with AIG, and with some of the banks that have failed.” Heightened regulations may have prevented the corporate scandals of 2000, and Turner believes a different set of regulations may have prevented or lessened the current recession. He dismissed arguments that regulation has unintended consequences or stifles innovation. “Increased regulation will not hamper innovation as much as the current crisis already has,” Turner said. “Its impact would be a drop in the bucket compared to the impact young companies face today, because they absolutely can’t get money to innovate.” The regulatory system failed on all levels, he said. Corporate systems of accountability and the federal government’s regulatory bodTatjana Koke, the minister of education and science of Latvia, discussed the eastern European nation’s ascent from a communist nation to fledgling economic engine during a visit to Lehigh. A guest of the college’s new Comparative and International Education program, Koke gave an often personal account of a nation undergoing political, economic, and social change on Wednesday, Sept. 24. Latvia regained its independence from the former Soviet Union in 1991 and, since then, has aggressively pushed a package of economic reforms designed to expedite its integration into the European Union and NATO. That rapid transformation contributed to a culture of change, a mindset that not all Latvians have embraced. “We have so much to do yet to strengthen our identity,” Koke says. “We’re putting a lot of effort into reorienting our people to become more structured and entrepreneurial, who can not only manage these changes, but provoke these changes. It’s the Latvian people who help stimulate our development.” Koke has led many of the nation’s reforms, and over the course of 17 years, Latvia made substantial gains in educational policy as the nation evolved away from the Soviet model of planned economy. More than 99 percent of Latvia’s children are literate, among the highest rates in Europe. The country also has the second highest percentage of students enrolled in higher education institutions in the world. And in a competitive European Union where professionals have greater flexibility to transcend borders, Latvia strives to retain and recruit an educated workforce. “What we understand by ‘freedom’ is being able to release ourselves from restrictions. Real freedom can only be reached by developing one’s own capacities. If we are knowledgeable, capable, open-minded, analytical thinking—these are what give you real freedom of choice,” Koke says. “And with that comes opportunity.”—Tom Yencho Lynn Turner, former chief accountant of the SEC, taught a two-week accounting course. ies did not prevent the creation and repackaging of subprime loans. “The executives didn’t do their jobs; the corporate boards failed to hold them accountable. Regulators didn’t do their jobs, and Congress failed to hold them accountable. Now, unfortunately, you and I and 100 million taxpayers are going to have to pay for this,” Turner said. “We tend to re-elect 90 percent of those in Congress every three years, so we’re not doing our job.”—Becky Straw winter 2009 9 PHOTO BY DOUGLAS BENEDICT THE SUBPRIME

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Alumni Bulletin - Winter 2009

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