A model of disclosure of subprime risks

Floyd Norris of the New York Times wonders: Wasn't Sarbanes-Oxley supposed to do something about the hidden, off-balance sheet risks? He writes: "The rules require that companies make some disclosures about vehicles off their balance sheets, even if they do not put them on their financial statements. But those disclosures have often not been made, or have been made in such a general way as to be meaningless." The stream of banks facing SIV risks is indeed long. But Norris also notes a solution. He says the 2007 annual report of State Street is a fine example of disclosure done right. It lays out why it has not consolidated its conduits held by off balance sheet entities. More important, it discusses what circumstances would lead the bank to place the assets on its balance sheet.  

For more:
- here's the column

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