Want To Curb Market Speculation? (Lot's of luck, your efforts will backfire)

Forbes ^ | 8/24/2009 | John Tamny

[SeekAndFind]

Back in 2002 and in the aftermath of the Enron and Worldcom implosions, former Sen. Paul Sarbanes, D-Md., and former Rep. Mike Oxley, R-Ohio, created the Sarbanes-Oxley bill, meant to curb allegedly funny accounting and business practices. As President George W. Bush asserted in signing the bill, "There will not be a different ethical standard for corporate America than the standard that applies to everyone else."

Nice political theater for sure, but then reality set in.

Fast-forward four years, and the joke was on politicians naïve enough to believe that corporations with aspirations of going public would lie prostrate before tough new accounting rules. Most--to the extent that they did go public--just floated their shares overseas.

Indeed, as Sen. Charles Schumer, D-N.Y., and New York Mayor Michael Bloomberg observed in a 2006 op-ed for The Wall Street Journal, "In 2005, only one out of the top 24 IPOs was registered in the U.S., and four were registered in London." In particular, they cited "auditing expenses for companies doing business in the U.S. [that] have grown far beyond anything Congress had anticipated," along with "a worrisome trend of corporate leaders focusing inordinate time on compliance minutiae rather than innovative strategies for growth, for fear of facing personal financial penalties from overzealous regulators."

So while the political class was eager to turn company CEOs into accountants rather than innovators, public-company heads had different ideas. Not excited by the idea of suffering under overdone legislation made in politicized haste, they simply went public on non-U.S. exchanges.

What Washington misunderstood back in 2002 was that finance is very much global, with the dollar the world’s currency. Two-thirds of all dollars are presently overseas, so if restraints are put on stateside investment--and those invested stateside--overseas markets are more than willing to take business

[jwparkerjr]

re: grown far beyond anything Congress had anticipated

Sure see this phrase, and several variants, a lot these days. The rhetoric Congress spews forth when working to approve a bad bill is replete with understatements and overstatements. They have absolutely no regard for the truth. They open their mouth and what comes out is solely for the purpose furthering their own cause, and in any resemblance it bears to the truth is purely coincidental.

Throw the bastards out!

[Senator John Blutarski]

The first law of the universe is The Law of Unintended Consequences. Congress believes that they are immune.

[jwparkerjr]

re: The Law of Unintended Consequences

And it’s first cousin The Law of Unexpected Consequences!