Treasury Undersecretary Robert Steel is complaining about US regulation, stating that the US is losing business to Europe and Asia because of the strangling effects of its regulatory policy. It is said that “cumbersome accounting rules and litigiousness are deterring investors from US markets.” The problem here, as Steel believes, is not the problem of intervention itself, but rather the fact that in the US accounting is on a rules-based system as opposed to a more progressive, principles-based approach.
The Treasury’s reaction is to form yet another committee to look into this problem (but it’s non-partisan!). This committee plans to “strengthen the auditing industry,” analyze why the restatement of financial statements are on the rise, streamline accounting procedures, and “reform” the more burdensome aspects of Sarbane’s Oxley’s Section 404 requirement. Note that SEC Chairman Christopher Cox believes that this re-regulation of old regulation will strengthen the highly-regulated US capital markets and make them competitive again. See the video clip here on Bloomberg. I suggest a good place to start - regarding the restatement of financials - is the Fannie Mae restatement debacle. One can ask how a company is not de-listed from the NYSE even when it does not issue an annual financial report for over three years...
As a final comment, the SEC plans to design these numerous reforms so that they can be implemented without the approval of congressional legislation.
