November 21, 2006
SarBoxo Delenda Est!
Rep. Barney Frank's proposed "Grand Bargain" with business sounded like a positive step to me. Taranto likens it to a protection racket today, but -- ever the optimist -- I see it as a chance for the most onerous business regulations to be lifted.
In exchange for minimum-wage hikes, health care guarantees, and a lot of other crap that we can just expect from a Democrat controlled House, Rep Frank offers some streamlining, consolidation or reduction of regulations. I'd trade Sarbanes-Oxley in for a higher minimum wage in a second. The minimum wage will hurt poor minority teenagers, but business will be fine. I know I sound like the heartless man on the Monopoly(r) box, but it's not my team that is pushing this.
On the other hand, SarBox is destroying the US Capital Markets. The WSJEdPage is concerned but measured in an editorial today (Paid site, sorry!)
We've argued that the Occam's razor explanation for this trend is that overregulation and lawsuits have tipped the balance in favor of private management for many investors. Managers who want to spend more time taking risks, and less time talking to lawyers, are increasingly turning to private equity to reduce their hassles and improve their returns. Money will flow to where the returns are, and these days more and more investors seem to think that more money can be made outside the hyper-regulated public equity markets.As a political matter, this should worry anyone who believes that the development of a broad investor class is good for the preservation of capitalism. But as an economic matter, it is largely irrelevant whether the shares are publicly traded or not. We doubt the employees of such profitable closely held concerns as Cargill or Koch Industries fret much that their shares aren't listed on any public exchange. What they care about is that their companies are successful.
They don't byline their editorials, but I can guarantee Stephen Moore didn't write that. On Kudlow & Company last night, he was much harsher on SarBox. He said that the private LBO buyoiuts are a disturbing trend and that London Stock Exchange refused the NASDAQ takeover in large part because they were worried that it might import SarBox in the UK capital markets -- and they're too smart for that.
I, for one, welcome our Democratic Overlords. If Frank, who is actually one of the smart and serious members of the caucus in line for a gavel will make that trade, we're in business. The S&P 500 is right to be less worried than ThreeSourcers.