Sarbox, Another View

Paul Sarbanes and Michael Oxley, renowned authors of the 2002 Sarbanes-Oxley corporate governance reform legislation, have become America's favorite whipping boys for the emigration of foreign equity listings to London from New York. But it was the earlier efforts of another congressman, one who now has far more influence over the competitiveness of the U.S. capital markets, which in fact sparked the exodus by deliberately mixing domestic market regulation with foreign policy....Cox, Not Sarbox To Blame, Benn Steil, The New York Sun, 4/5/2007

Steil wouldn't disagree with other points on this blog about government intervention in free markets. This fine article points out that Sarbox, born in a fervent, but not very well-informed, climate of reform, had a predecessor. That was the efforts by Congress, mixed with highly-conflicted intelligence, to interfere with Chinese intelligence-gathering by restricting access to U.S. capital markets. That was a Republican Congress, but the effect was the same, to wit:

When studying PetroChina's Sudanese oil business in 2004, I found that its largest non-state shareholder was Warren Buffett, controlling 14% of the public shares. He chose to buy 95% of them in Hong Kong, rather than in New York, highlighting the irrelevance of the sanctions campaign, which had no influence on the behavior of either PetroChina or Sudan....(Cox, Not Sarbox...continued)

Political regulation, like careless economic legislation, is about like trying to stop up a sieve with hat pins. If there's no flow through one hole, there are thousands of others. With the interpenetration of national borders by the Internet and thousands of private networks, one can, as advertisements have suggested for years, trade anywhere for anything. The net result of regulation or legislation most times is the construction of yet another bureaucratic mess that restricts the very people it was trying to protect while having no positive effect other than a pat on the politician's back.

Luther