Praise for Nancy Pelosi?

Having heard her speak and knowing her position on issues, I had a very, very low opinion of Rep. Nancy Pelosi (D-CA) and didn't think I would ever use this forum to praise the Minority Leader of the House of Representatives. Well, I was wrong. According to the Wall Stree Journal, on at least one issue she gets it (or someone explained it really slowly for her). That issue? The horrendous anti-growth legislation called Sarbanes-Oxley.

In the recent "Innovation Agenda" that the House Democratic leader and her party unveiled, Ms. Pelosi acknowledges specifically the need to "ensure Sarbanes-Oxley requirements are not overly burdensome," and endorses reform.

Okay, maybe she doesn't come right out and condemn Sarbanes-Oxley, but it's a start.

Here is a short primer on Sarbanes-Oxley for those not into business news.

Congress passed this law hastily in 2002 after the egregious accounting frauds at Enron and WorldCom. The intent was to hold publicly held companies and their executives more accountable and weed out bad actors; but that's not been the effect. Four years after passage, it is now evident that the costs of Sarbox clearly outweigh the benefits. Sarbox highlighted the importance of financial transparency and management integrity. And those in the corporate world who break the law should be punished. They are: Over 700 prosecutions have been launched since 2002 to address corporate crimes. Nevertheless, not one conviction was a result of Sarbox. Meanwhile, Sarbox clearly failed to prevent the massive accounting scandal at Fannie Mae.

The problems of ENRON, Worldcom, and other frauds didn't arise because of the absence of more regulation. No, there are two causes of those scandals. Internally, a company must be rife with either corrupt or incompetent executives. Externally, the enforcement arm of the SEC must be asleep at the wheel as it was in the 1990's. Sarbanes-Oxley would be more correctly termed the Accountants Full Employment Act because of its excessive and onerous reporting requirements.