Still, the positive response to the revision was by no means unanimous, suggesting that the legacy of Enron might not go so gentle into that good night. Sen. Carl Levin, the chairman of the U.S. Senate Permanent Subcommittee on Investigations — the unit the recommended that the agencies take action on structured finance risks in the first place — was highly dissatisfied with the final statement.

Reacting to the release of the statement, Levin said that, back in 2004, the rulemakers "proposed tough new guidance to prevent the abuse of CSFTs from corrupting financial statements and abetting tax evasion." Now, however, "those same regulators have inexplicably issued a much weaker final guidance than proposed in 2004," he said.

Among other things, Levin criticized the regulators for eliminating "plainspoken language" in the original guidance that warned against stuctured-finance abuses, "including a description of the CSFTs that should be avoided and the risks they present, such as CSFTs that facilitate deceptive accounting, circumvention of regulatory or financial reporting requirements, or tax evasion."

The senator also threw down the gauntlet to the regulators. "Congress needs to watch very closely to see if this weakening of the guidance results in weaker enforcement or an increase in structured finance abuse," he said.

Another group of critics even suggests that the regulatory agencies "invite reckless participation in illegal conduct either as a primary fraud doer or an aider and abettor of another's fraud." That statement came in a rare critical letter in response to the proposed final version of the statement in May 2006 written by four law professors who served as expert witnesses in a case Enron shareholders brought against the Vinson & Elkins law firm.

The professors — George M. Cohen, University of Virginia Law School; David a Dana, Northwestern University Law School; Susan P. Koniak, Boston University Law School; and Thomas Ross, University of Pittsburgh Law School — charged that the statement gives banks the discretion to market a new product highly "indicative of fraud" without additional scrutiny or an independent outside assessment.

Among the transactions that the statement says "may" warrant added scrutiny are ones that lack "economic substance or business purpose," are designed mainly "for questionable accounting, regulatory, or tax objectives," and ones that involve circular risk transfers. The lawyers' concern was that the regulators failed to say "these things are presumptively bad," Cohen told CFO.com. The "red flag" characteristics cited in the statement "all point in the direction of fraudulent deals," he says. "For the agencies to say something weaker than that is an encouragement of misbehavior."

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