'Subprime Chuck' Plays the Fool

by: Eddy Elfenbein

The subprime mess has ushered in a new level of clueless political grandstanding. Naturally, Chuck Schumer is around to take first prize.

The chairman of Congress's Joint Economic Committee then called on the firms to "assist this country's mortgage crisis" and "urge your clients to do their part to keep our housing markets afloat, by modifying subprime loans that are at risk of default."

In so doing, Subprime Chuck made a blithering fool of himself, though he probably doesn't realize why. So far, none of the four firms -- PricewaterhouseCoopers, Deloitte & Touche, Ernst & Young, and KPMG -- has responded publicly to his plea for lobbying help.

You see, management's job is to manage, and the auditor's job is to audit. There's also the decades-old requirement under U.S. securities laws that accounting firms must be independent of the companies they audit, both in appearance and in fact.

Under the Securities and Exchange Commission's rules, that means the auditors, among other things, "must act in an unbiased and objective manner." Lobbying audit clients to change their business practices is the mark of a biased auditor, not a disinterested one.