There's an article in the Sunday New York Times about how the current mortgage debt crisis in the U.S. financial system came about (http://www.nytimes.com/2008/03/23/business/23how.html?ref=business&pagewanted=all)

There are calls for new regulations and changes to the Federal Reserve/SEC mission, but one passage in particular struck me:

"Among the topics they discussedwere investment vehicles that allowed Citigroup and other banks to keep billions of dollars in potential liabilities off of their balance sheets — and away from the scrutiny of investors and analysts. "

Is it legal to publish a financial statement (the balance sheet) that is materially misleading and incomplete? What made this possible? Was there an act of Congress that allowed this? Did a regulatory agency (the SEC?) rule that you could invest billions of dollars in something and not disclose the fact on your balance sheet?

Regulating the new debt derivative markets may be sensible (or not - I don't know), but laws and regulations that ensure accurate financial statements are an absolute necessity.

Next week: A really good potatoe pealer, with photos.