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Was Sarbanes-Oxley Needed? - FINANCIAL-24

There is a truly bizarre article in today's NYTimes by Gretchen Morgenson, originally published on September 7th.  The point of the article is that the "Sarbanes-Oxley" regulations that currently strangle America's financial system are good for investors.  Did investors need help?

The average investor has earned over 12 percent returns for the past 120 years.  That means you double your money, on average, every seven years.  Pretty spectacular!

So, was there a need for a change?  Is 12 percent not good enough?  Citing Worldcom and Enron, Morgenson says that investors needed protection.  From what?  Stock market gains?

Even with the problems of Worldcom and Enron, investors did terrifically by owning diversified stock portfolios that roared upward, even those containing Worldcom and Enron.  So, what's the point of punishing every other stock because one or two had criminal activity (which was exposed and dealt with under the existing law, without any need for Sarbanes-Oxley's madness).

When Worldcom and Enron were exposed, the Dow Jones was trading at 10,000.  Today, seventeen years later, the Dow is trading at 22,000.  So, how exactly were investors hurt by Worldcom and Enron?

Sarbanes-Oxley has had a debilitating effect on the economy and led to a shrinkage of public companies.  Today, there are fewer public companies for investors to own than there were prior to Sarbanes-Oxley and the economy has endured the slowest economic recovery in its history.  Thank you, Sarbanes-Oxley and Dodd-Frank!

"Don't fix what ain't broke" goes the old saying.  If you don't like a century of 12 percent average returns, then kill the goose that lays the golden egg.  That's what excessive regulation does.

We have endured the crash of the 1930s and the 2008-2009 financial collapse.  Stocks are still much, much higher than they have ever been.  It is not possible to have lost one cent on a diversified portfolio of stocks if you still own them today.

But, the left cannot resist.  They never met a regulation that they didn't love.  Sarbanes-Oxley and Dodd-Frank threaten a century of good stock returns by regulatory overkill.

Seems to me 12 percent was a pretty good track record.  Why destroy it?

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