Socked by S-Ox

The Cranky Economist's small but growing fan club may recall that in Saturday's A&L, I pointed out that the pre-Sarbanes-Oxley laws had been perfectly sufficient to send Bernie Ebbers, a raft of former Enron execs and Martha Stewart up the river.

However, these pre-Sarbanes-Oxley regulations were not at all up to the task of creating mountains of expensive and wasteful red tape for companies across the economy. Never fear -- Congress, in its infinite wisdom, has solved this problem for us.

You'll recall that S-Ox was passed and signed into law even before the last little shreds of Enron-related paper had wafted to the floor of Arthur Andersen's offices. The theory was that the execs at Enron and WorldCom (and their accountants) -- who had already lied shamelessly and repeatedly about seemingly every aspect of their businesses to anyone who asked -- would have told the truth if only they had been required to sign off personally on their corporate financial reports and to certify corporate compliance procedures. While we're at it, anyone interested in buying a bridge?

So what we are left with is a bunch of avaricious former corporate officers who would have been going to jail anyway, while the rest of us dig out from under reams of new regulatory paper and the attendant billions of dollars in compliance costs -- costs that will haunt the economy from here to eternity, since this increased regulatory burden isn't intended to phase out. Economists will eventually perform studies that will quantify in dollar terms exactly how expensive this law has proven to be. What will that number mean for you and me in terms of lost economic growth? Impossible to say.

But at least we were all so impressed with Congress' corporate crime fighting that we re-elected them. So Sarbanes-Oxley appears to be working just as intended.