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Paul Sarbanes and Michael Oxley… London loves you! The more I read about the flood of money coming into the City of London from the United States, the more I am convinced that in the spirit of Christmas and fraternal Anglosphere conviviality, the people of London should say a heartily thank you to Maryland Democrat Paul Sarbanes and Ohio Republican Michael Oxley.
In fact, in the new year I plan to launch a subscription appeal to put up a pair of gold plated statues somewhere in the square mile, depicting these two fine politicians throwing handfuls of dollar bills to a multitude of grateful City of London bankers, fund managers, stock brokers and other sundry worthy capitalists, as great numbers of companies decamp from New York and list in London instead.
And so Paul and Michael, on behalf of all those fine folks here in Merry old England whose Christmas bonus packages have gone through the roof, thank you. We could not have done it without you. God bless globalisation.
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Would this be yet another example, that excess in a (seemingly) good cause is a bad thing?
[That would be just for the home country.]
Best regards
What a good idea, Perry. Let’s not also forget Eliot Spitzer, the NY Attorney General who has crossed the line repeatedly of confusing legitimate hunting down of fraudsters with wholesale abuse of his office and bullying of Wall St. firms
Actually, I get the feeling that something may move quite soon next year on S-Oxley because of the complaints. Of the IPOs last year, only a fraction were held in the USA. More and more public firms are going private, usually through management buyouts or private equity deals, and it is possibly going to damage the overall efficiency of the global financial system.
This whole sorry mess ought to be a further wakeup call for the Republicans, who seem incapable of putting the case for free and unfettered markets any more. But given their historical baggage as a protectionist party, perhaps that is not surprising.
Let’s not forget the armies of consultants and accountants here in the US.
That is true, but those were the people it was intended to benefit… the UK and Hong Kong financial markets are the ones who are the new special chums of Sarbanes and Oxley for so thoughtfully exporting all that huge mountain of dosh that would otherwise have generated in the USA.
Of course it has been a very good year for bonus payments in the United States as well (Wall Stree people are making a lot of money), but I agree that Sarbanes-Oxley is wrongheaded as are teh accountancy rules (and so much else).
Sadly a lot of this is comming here (or already has) either because of the direct actions of the British government (going back to the 1980’s) or the indirect demands of the E.U.
On the future, yes a lot of Americans (including some Democrats) hold that S.O. goes “too far” and want to do something about it.
However, a lot of Democrats (led by Barney Frank) wish to create a “level playing field” by having an international financial services regualtions (and international regulations coverning a lot of other things as well). This is an old story – one can trace it to President Wilson and his “other self” E.M. House (indeed one can trace it all the way back to I. Kant and other philosophers if one bothers to do so). But there seems to be more chance of this world government stuff at the moment.
The Republicans – yes Mr Pearce is correct.
The Republicans (mostly) grow out of the Whigs – the party of Henry Clay and the “American System”. “National Bank, protective tariff and internal improvements” – the principles of Lincoln, before (after 1854) he started to use slavery as a vote getting issue.
The Republicans were the “party of business” not the party of free enterprise, and (of course) these are very different things.
The Republicans were never a sociaist party or even a social democratic party (or anything like it). But they were a party (and of course I am simplyfying things – because things varried from State to State and from faction to faction) that believed in using the power of government to help business enterprises (usually big business enterprises).
In short the Hollywood view of the Republicans is not a million miles from the truth (although Hollywood tends to leave Lincoln out of this image – which is wrong as he was worse than most Republicans, going right back to his days in State politics in Illinois).
However, after the terrible Convention of 1896 (when they basically free enterprise faction of the Democrats lost out to the Popularists) the Republicans (in most States most of the time) have been the lesser evil.
Also some Republicans really have been in favour of lower taxes (and not just on business enterprises) and lower government spending. The much attacked President Warren Harding (the corruption in his Administration was certainly less than the corruption in Administrartions that historians like such as that of F.D.R. or Harry Truman) dramatically cut government spending (and remember he took over in 1921 – W.W.I. had been over for more than two years). Calvin Coolidge was also honestly in favour of less taxes and government spending.
Of course neither man was in favour of free trade. And Herbert “The Forgotten Progressive” Hoover was a active government Republican (although even he was still against creating entitlement programs – the Welfare States that threaten to destroy the West).
Both Barry Goldwater and Ronald Reagan (not the dimwit that the academics claim – as his well used copies of Hayek and Mises works show) tried to turn the Republicans into a truly profreedom party – they both failed.
On the ultra statist Richard Nixon – the less said the better (although President Ford is underestimated – he was well guided by William Simon).
On the two Presidents Bush, well the “education President” and the “compassionate conservative” are supposed to be really nice people on a personal level. Pity they went into politics.
The future:
The Republicans have nowhere to go but the free market.
“War party” will not work. Americans tend to have no objection to killing people, but they want clear objectives to wars and they want them WON. Not vague President Wilson objectives like “building democracy” (or “nation building), and not “the hunt for Bin Laden” rather than “here is his head”. Whatever else November 7th proved it showed that “war party” is an election loser.
Pork (“compassionate conservatism to help local communities”) angers the Republican base voters (they do not want money and favours handed out – do that and they will stay home, not come out to vote Republican). This is the Democrat’s politics – their people like this (and they will not vote Republican when their own leaders will produce even more Pork, or even if they do not).
“Party of morality” – play that game (like British Prime Minister John Major’s “Back to Basics”) and the media will delight in finding Mark Foleys. Of course the Democrats have far more people who bugger boys and accept bribes (and so on) – but Democrats do not claim to have morals in the same way (morality for them is about “distributing income”, government education, government health care and other such) so they see no need to resign when found out (and their base voters reelect them).
Even leaving a young women to die in a river (whilst you telephone your lawyer) and helping rapist family members hide from the law for years, will not prevent you being elected to the United States Senate for a half a century – but only if you a Democrat.
So Republicans have only one place to go – the free market. They must really work to roll back government (not just talk about it at election time), and they must learn to argue the case well – in order to get people to vote for them.
Because (as explained above) they are not going to vote Repubilican for any other reason.
“Party of the war effort” – not worth further comment.
Try spending money and your own voters will be disgusted and they will stay home (and the the people who like all the “compassion” will still vote Democrat and even denounce you for “cuts”).
Play “party of morality” and the media will look and look till they find a Mark Foley -and even if the Democrats have ten for every one you have got, this will not help you (nor will the Democrats resign – and they will be reelected, even with 90,000 Dollars in their fridge).
So that leaves “free market” rolling back government spending and regulations – and you had better mean it.
Sarbanes Oxley compliance seems to mean very different things to different companies. I have not troubled myself to read the entire Act itself but, from what I can gather it has rather sweeping but non-specific requirements. The average corporation hires some consultants to tell it what to do. Those consultants distill the Act into reccomendations (suffuse with personal interpretation and prejudice) to an internal project team that then devotes more hours into passing down reccomendations and requirements to departments. By this time the requirements have become incredibly specific and rather stupid. In my corporation it has come to pass that wireless networks are not “Sarbanes-Oxley compliant.” Each office has to prove it does not have a wireless network; this is certainly not the only time we are obliged to prove a negative. My favourite piece of idiocy is the requirement that the dial-in modems used for emergency restoration of network routers must be plugged in but turned off. Our auditors seem to be satisfied by a photograph of the modem with the switch off.
Not forgetting our own little home-grown carbuncle, the unpleasant anti-semitic, fundamentalist’s fundamentalist Ken Livingstone who, while now resorting to naked thievery in his desperation to fund his 2012 Moby Dick, has delivered this little socialist gem on city traders’ bonuses(Link) and his desire to tax them further.
Johnathan – there are some stirrings from the US exchanges about the damage wreaked by SO. In 2000, 90% of non-US IPOs were listed on US exchanges. In 2005, only 2 of 25 non-US IPOs were US listed.
But the major beneficiaries are the private equity firms. After all, who the hell wants to be ‘Sarbanes-Oxley’ compliant when you can run your entire business behind closed doors. Will all corporations soon operate privately? Why not.
Merry Christmas
I’m sad that Jonathan Pearce is the only person to mention Spitzer. If you look at polls of what executives are interested in, it’s much more Spitzer and his ilk that concern them. SOX was expensive initially, because making substantial changes to accounting procedures will always be expensive, and the law was designed to increase costs somewhat. It doesn’t hit so bad in later years, or if the company is set up to be compliant ab initio. It should also be noted that the extra costs do have some benefits attached.
Spitzer’s success, on the other hand, is a very, very good reason not to be in the US. It is one of many testaments to the interests of the MSM that Spitzer is consistently heralded as a hero, while the considerably superior cost/ benefit trade-off of SOX is derided as Bushitler stupidity. FWIW, as a corporate attorney, SOX probably marginally benefits me personally, whereas Spitzer keeps my client pool down. I set up US-other (mostly Indian) joint ventures. I don’t litigate and I don’t believe it’s possible to write Spitzer-proof contracts.
James of England makes a good point, where a ruler (an administrator or a politician) has arbitrary power “contracts” and “ownership” lose a lot of their meaning.
This was true in the Ottoman Empire and many other oriental despotisms, and it is becomming true in the United States and many other nations.
The West is not at the level of despotism yet – but if people like Spitzer are not defeated it will be.
As for the popularity of people like Spitzer – no surprise.
Ludwig Von Mises (and many other writers) pointed out that whenever a Sultan moved against a rich man (stealing his goods and even murdering him) the people would dance in the streets – they had been taught to believe that their poverty was due to the wealth of the rich.
And this is exactly what is taught by the “education system” (most schools and colleges), the media (not just Hollywood films – but most broadcasting stations and newspapers as well), and the mainsteam churches.
The mainstream Protestant churches have long been in decline (indeed the term “mainstream” may now be mistaken as only a small minority of Protestants have anything to do with them), and there seems to be a large scale fight back against the “liberation theology” types in the Catholic church (although the struggle against teaching influenced by such concepts as “social justice” will take longer).
The mainstream media is also in decline (both print and broadcasting) but it is still very powerful, and the new media has a very strong collectivist element (the people of the “Daily Cos” are ruthless and well organized) – so I do not know how the battle will go.
As for the “education system” – this is the hardest problem.
The state schools (and colleges) are (in my opinion) unreformable, it may be true that they were less biased in the past but the very nature of government education makes it a natural breeding ground for collectivism.
Also many private schools and (in the United States) universities ape the statism of the government schools.
Partly this is because they use the same text books and often their pupils are subjects to the same examinations and (at least in the United Kingdom) the schools are subject to government inspectors.
Home schooling is a threat to statism (although only a small percentage of children are homeschooled), which is why many governments act against it. Belgium is one of the few countries where home schooling is formally protected by the Constitution (the constitution of 1831 that is the foundation of the country) – but this has not stopped the government taking action against it (via demands that parents sign statements supporting collectivist “values”, visits by inspectors, threats to take children away – and so on).
However, there is one great advantage we have over the statists. Their way does not work – it leads to economic decline and eventual collapse.
As statism fails people MAY turn against it. All it would take is the population of one major country to turn against statism – the EXAMPLE of such a country would be enough to defeat all the lies of the collectivists.
If the population of no country turns against such doctrines as “social justice” then indeed civilization will fall, but other civilizations will arrise in the furture. “But we will not live to see this” – we will not live to see many things, that is unfortunate but such is life.
There are many things that even the hand of evil can not destroy – and economic law is one of them.
Paul Marks: outstanding comments. It is the rare American, let alone Brit/European (I assume) who actually understands American history to the depth that you described.
My only beef is with the Reagan assessment–although he was a very good marketer of free markets, his presidency is definitely mischaracterized. IMO, a solid half of credit attributed to Reagan should instead be attributed to Carter moves (Volcker’s appointment, removal of ICC, capital gains tax cut) that don’t mesh well with the image of Carter as a failed wannabe-socialist president.
That said, of course, Carter was a fiasco. But intellectual honesty is the more important thing.
http://the-ts-maven.blogspot.com(Link)
Allow me to offer a little contrarian sentiment:
1. Hong Kong is going to have more and more IPOs because it is the stock market closest to China.
2. Said Chinese firms probably like to have less regulation…for a reason: keep in mind the company with the sole right to make and sell jet fuel in China managed to go bankrupt..gee, but I am sure HK auditors are doing their best to catch that sort of trickery…LOL.
Not saying Sarbanes Oxley is good, but that there are other reasons IPOs are happening in Hong Kong.
Staying away from Spitzer is easy, if you stay away from New York — not always easy, of course, given NYC’s status in the financial world — but still quite possible.
After all, several companies moved from NYC to less hostile climes (eg. J.C. Penney and American Airlines to Dallas), and now fewer and fewer companies are incorporating there too.
I ran an informal poll among my Readers some time back, posing the “one free shot” question (for my Brit Readers, the game is as follows: you have one clear shot at someone, with no chance of ever being apprehended; who gets your bullet?).
Eliot Spitzer came out #3 (and #1 by a huge margin among my Northeast Readers).
We know all about this dickhead Over Here — and we also know that his governorship of NY is just a springboard to a bid for the U.S. Presidency in the future.
Not gonna happen.