Our glibertarian princess, our just-barely-Ivy League just-barely-intellectual, our bouncing baby bankster booster, our corporate whore who always wants to give more—Megan McArdle!—has returned! You can keep your Julian Sanchezes and Katherine Mangu-Wards and Tony Woodliefs, all amateurs at the fine art of deception and delusion. We’ll take the real thing, a woman who can toss the poor to the wolves, campaign to cut social security, and still find time to buy a new kitchen gadget before lunch. Forget those feeble guest bloggers. Watch how a pro gets the job done.

My first day back at work as a married woman has been an exciting one at, among other places, the Supreme Court.

Note how Ms. McArdle (she didn’t take her husband’s name) managed to work in a mention of her new status in the first sentence. It is to be expected when someone returns on her honeymoon, but don’t worry, we are certain she will work in her married status at every opportunity.

Yes, the gun ban was struck down–more on this later.

McArdle loves to pretend to care about firearm laws, but obviously that can wait so she can get to the good stuff.

But first, financial regulation.

Sarbanes-Oxley is not very popular in large swathes of the financial world, and among some financial pundits. Arguably, it doesn’t do much except intensify the compliance burden of public companies.

McArdle does not define the law and discuss its history so her readers can understand the issue, of course. She paid a lot of money for such information at the University of Chicago and you didn’t, so you don’t get any. The elite know what’s best for everyone, so we should just read what they say and take their advice. McArdle uses information like a weapon, and prefers to keep her weapons hidden in an ankle sheath, or perhaps down her bra.

The Sarbanes–Oxley Act of 2002 regulated ” all U.S. public company boards, management and public accounting firms.”

The bill was enacted as a reaction to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of affected companies collapsed, shook public confidence in the nation’s securities markets.

It does not apply to privately held companies. The act contains 11 titles, or sections, ranging from additional corporate board responsibilities to criminal penalties, and requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the new law. Harvey Pitt, the 26th chairman of the Securities and Exchange Commission (SEC), led the SEC in the adoption of dozens of rules to implement the Sarbanes–Oxley Act. It created a new, quasi-public agency, the Public Company Accounting Oversight Board, or PCAOB, charged with overseeing, regulating, inspecting and disciplining accounting firms in their roles as auditors of public companies. The act also covers issues such as auditor independence, corporate governance, internal control assessment, and enhanced financial disclosure.

Why was this law passed? In a word, Enron.

The bill was enacted as a reaction to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of affected companies collapsed, shook public confidence in the nation’s securities markets.

A congressional hearing found “inadequate oversight of accountants, lack of auditor independence, weak corporate governance procedures, stock analysts’ conflict of interests, inadequate disclosure provisions, and grossly inadequate funding of the Securities and Exchange Commission.”

The Enron scandal deeply influenced the development of new regulations to improve the reliability of financial reporting, and increased public awareness about the importance of having accounting standards that show the financial reality of companies and the objectivity and independence of auditing firms.[4] One consequence of these events was the passage of Sarbanes–Oxley Act in 2002, as a result of the first admissions of fraudulent behavior made by Enron. The act significantly raises criminal penalties for securities fraud, for destroying, altering or fabricating records in federal investigations or any scheme or attempt to defraud shareholders.

A variety of complex factors created the conditions and culture in which a series of large corporate frauds occurred between 2000–2002. The spectacular, highly-publicized frauds at Enron, WorldCom, and Tyco exposed significant problems with conflicts of interest and incentive compensation practices. The analysis of their complex and contentious root causes contributed to the passage of SOX in 2002.

But the regulation of corporations is a bad thing in McArdleland. Making people take responsibility for their actions or removing incentives for fraud are terrible burdens to place on companies, as we well know.

Higher compliance requirements are a disproportionate burden on smaller companies, who have less revenue across which to spread the cost of attorneys, accountants, and administrators required to meet the new burden. In effect, then, it raises the minimum level of assets at which it makes sense to operate as a publicly traded company. To the extent that you believe that the financial reporting requirements for public companies increase the transparency and efficiency of the economy and the financial markets, this is counterproductive.

The law’s defenders argue that these costs are a small burden to bear in exchange for greater accountability for larger firms (with whom we naturally tend to be more concerned–microcaps rarely deal body blows to the stock markets, much less national or regional economies).

Whichever side you believe, you’re probably pretty interested in the court’s latest decision, which ruled part of Sarbanes Oxley unconstitutional.

But don’t get too excited–as far as I can tell, the ruling was actually pretty narrow. Basically, it says that the president has to have some control over the board that oversees Sarbanes-Oxley; otherwise, it violates separation of powers.

[yap yap]

On net, I’d expect that this might shift the ideological drift of the board slightly towards the president’s side of the spectrum; but that it will also slightly temper the parochial and partisan influences.

In conclusion, McArdle thinks that maybe this, or maybe the slightly opposite.

But overall, I don’t see this making a huge difference in the quality of financial regulation. Of course, over the next day or so, observers with firmer positions on the merits of Sarbanes-Oxley (and presidential oversight) will no doubt hasten to elaborate those positions, so I reserve the right to change my mind.

Wisely, McArdle notes that she might be totally wrong, and therefore she reserves the right to take backsies at any time.

What McArdle does not note is who sued the government to get rid of Sarbanes-Oxley. It was something called the Free Enterprise Fund.

The Free Enterprise Fund is a Section 501(c)(4) organization based in Washington, DC. The Free Enterprise Fund was founded in January 2005 by Stephen Moore and “some prominent” Club for Growth “members including Arthur B. Laffer, a board member, along with Mallory Factor, a businessman,” following a rift in Club for Growth at which time Moore was “privately ousted” as Club for Growth president in December 2004, David E. Kirkpatrick reported in the July 8, 2005, New York Times.

The Fund describes itself as “the preeminent lobbying force in Washington for the passage of legislation that will promote economic growth, lower taxes, and limited government.”

Also:

FEF Policy Council
Arthur B. Laffer, Co-Chairman
Lawrence Kudlow, Co-Chairman

So Lawrence “Bush Boom” Kudlow and his bestest bud Arthur “I can draw the economy on a napkin!” Laffer and their friends took their balls and went home set up their own no-taxes-or-regulation-for-the-rich organization, which sued to get rid of Sarbanes-Oaxley. Beyond that, things get a little confusing. The Free Enterprise Fund’s blog is defunct. Their web site has very little information, almost all of it relating to taking donations.. Their PAC raised a bundle in 2006, almost nothing in 2008, and has evidently folded in 2010. Its website is also gone. Where did the large amount of money necessary to take a case to the Supreme Court coming from–individual donations?

Does CNBC care that their host and some of his favorite guests are working to eradicate corporate and accounting regulations? It certainly wouldn’t be a surprise to anyone who has watched the Kudlow Report, but Kudow’s political activism is very pertinent to his career as “journalist” and pundit, and ought to be made very clear to his audience and the rest of the media.