Regulation – Jumping Over Trillions To Save Billions

Posted by Jason | Posted in Government | Posted on 04-12-2009

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The Wall Street Journal had an op-ed this morning about a case heading to the Supreme Court about the constitutionality of the “Public Company Accounting Oversight Board”, which was established to enforce Sarbanes-Oxley. While I don’t want to get into the case, because it talks about the constitutionality of the board not reporting directly to the President, which I don’t really care about, because I don’t think the board should even exist. The one paragraph that stood out to me though was the cost of this regulation on the economy.

Massive is the right word. The accounting board’s wide-open mandate—to make whatever rules “may be necessary or appropriate in the public interest or for the protection of investors”—has cost the economy nearly $1 trillion, according to a study by AEI and the Brookings Institution. The benefit is supposed to be investor protection. But despite these costs, the law did nothing to warn about the meltdown of mortgage-backed securities, much less expose Bernie Madoff or other fraudsters.

via Sarbanes-Oxley on Trial – WSJ.com.

Here we are talking about an on going crisis with higher and higher unemployment, and we have this regulation that costs the economy $1 trillion in what, 7 or 8 years. Also, let’s remember what this law was for. It was to make sure an Enron never happened again.

First, how much did the Enron collapse cost investors? According to a source on Google answers, who backs up his answer with citations, it was somewhere around $60 billion. OK, so here we are with another moronic government law. Because someone committed fraud, which was already a crime, they pass another law that costs the economy $1 trillion. There was a crime committed. What don’t they get is that laws don’t stop criminals. It only gives you a means to punish them after the fact.

Second, did this law that cost our economy $1 trillion stop fraud? No, as we all know, the government sponsored entity, Fannie Mae, committed accounting fraud. Who has been tried for that? Also, it did nothing to prevent Madoff or any of the other disasters that just occurred in the “crisis”. Guess what? Ponzi schemes are illegal (well except gov’t ones), and guess what? It did not stop Bernie Madoff or any of the other guys currently in the news for Ponzi schemes.

The government needs to quit with these stupid laws. If fraud is illegal, then prosecute people who commit fraud. You don’t need additional laws and regulations that cost us trillions of dollars. Even better, get rid of the SEC, insider trading laws, etc. If people knew they had to be more careful with investing, because the knew the government wasn’t going to protect them, which they don’t anyways, they would make better investing decisions. If they didn’t, it’s their own damn fault. I’m sure if insider trading wasn’t illegal, there would have been some transactions, insider sell-offs, shorts, puts, etc that would have alerted investors that something was up with Enron, and it wouldn’t have cost the economy $1 trillion.

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