Anti-business regulation bites back, undermines New York City, the citadel of American socialism.
The Sarbanes-Oxley regulatory bill was enacted in 2002 by Congress in response to the fraudulent accounting manipulations that devastated Enron Corporation. That act is a typical expression of liberal-socialist-progressive instincts. It establishes a web of procedures, in great detail, that corporations must implement, rather than establishing guidelines of impropriety that corporations must not traverse.
Intent upon responding quickly to voter outrage, members of Congress ignored predictions that Sarbanes-Oxley costs to business would far outweigh the intended benefits to investors and employees. This is the usual result when socialist-progressive state-planners attempt to micro-manage things, presuming that they know better than you what is good for you.
Now even far-left liberal New York Senator Charles Schumer is joining liberal-Republican New York City Mayor Michael Bloomberg to protest the unintended effects.
In a Wall Street Journal article dated January 22, 2007, reporter Aaron Lucchetti writes:
New York City Mayor Michael Bloomberg and Sen. Charles Schumer (D., N.Y.) plan to release a report today outlining regulatory, legal and accounting changes they say are necessary to maintain the city’s status as a leading global financial center.
The two politicians suggest that the 2002 Sarbanes-Oxley corporate-governance and accounting act be relaxed, especially for some foreign and small companies. They also say class-action lawsuits should be curbed, corporate financial reporting should be harmonized with other countries and immigration restrictions should be relaxed so skilled workers and foreign business visitors will find it easier to come to the U.S.
“If we do nothing, within 10 years while we will remain a leading regional financial center, we will no longer be the financial capital of the world,” the two men wrote in a letter attached to the report, prepared by consulting firm McKinsey & Co. The report cost about $500,000 to produce and was paid for by the New York City Economic Development Corp.
Study of U.S. competitiveness versus London, the European Union and Asia has heated as politicians and business leaders become concerned about the position of the U.S. as capital-markets leader. A shrinking proportion of international companies are listing shares on U.S. stock exchanges, and fast-growing parts of the financial world, such as over-the-counter derivatives trading, are growing more rapidly elsewhere, the report said.
Globalization and technology have given companies more choice about where they raise money. Large Asian companies, for instance, have been going public in their home markets.
The report finds that a broad measure of financial activity known as financial stock—the sum of a country’s public equities, debt and bank deposits—grew at a compounded annual rate of 8.4% in the United Kingdom, 7.5% in Japan, 15.5% in Asia outside of Japan and only 6.5% in the U.S. between 2001 and 2005.
From 2002 to 2005, London’s financial-services work force expanded 4.3%, while New York City’s fell 0.7%, or more than 2,000 jobs.
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