5 ms·

I wished these articles concentrated more on the solution. It is easy to say what is not working. He mentions that public company is not going to grow as much,

I wished these articles concentrated more on the solution. It is easy to say what is not working. He mentions that public company is not going to grow as much, but then where should we put our retirement money in?

ahomescu1 12y ago
I think he hints at the solution: reduce regulation (he names Sarbanes-Oxley as one problem).
- api 12y ago
  If we did that, wouldn't people just run more Enron-type scams? Fraudsters and con men have been engaged in a Red Queen's race against investor intelligence and government regulation since there has been economies. https://en.wikipedia.org/wiki/Red_Queen%27s_Hypothesis https://en.wikipedia.org/wiki/Red_Queen%27s_Hypothesis These regulations might be messy but they contain valuable information that has been learned from this arms race. They're patches to try to prevent the same thing from happening again. It's much like computer security, where OSes and network protocols are constantly patched or re-engineered to be resistant to newer attacks. "Attacks only get better." It may however be possible to improve Sarbox by reducing its complexity, thereby reducing the complexity tax that harms smaller companies and discourages growth IPOs.
  - ArkyBeagle 12y ago
    There's a big problem generalizing from Enron. Enron was more complex than that. There were two basic defects with Enron: 1) The energy traders were rogue by virtue of poor governance. The problem was baked into the compensation scheme there and could not be undone. 2) Skilling was rogue, but his sort of SPE manipulation was actually quite common. The rest of the company is believed to have been fundamentally sound. Enron was the big hero until they basically put CALPERS at risk. Then the story changed. I watched as the California energy deregulation unfolded. It was apparent that it would fail exactly as it did. There's a larger background of boom-bust globally but especially concentrated in the US for ( I think ) path-dependent reasons. See "Nation of Deadbeats" for a semi-historical treatise on the subject. This goes back to John Law and the Mississippi Bubble - but each is different. I don't get the feeling the whole subject is clearly understood. The dominant "left-right" beliefs are not helpful. The left believes regulation can fix it; the right thinks ... something else will ( usually a bland nod towards competition). Thinking about stability is quite new. It's not clear we know what we're doing.
  - ahomescu1 12y ago
    > They're patches to try to prevent the same thing from happening again. Prevention by regulation IMHO creates as many problems as it solves because it punishes everyone involved, not just the guilty. I'm more in favor of prosecution (for fraud or insider trading, for example) as a method of prevention (where you just get punished for breaking the law after the fact).
    - rayiner 12y ago
      The problem is that there is little will to prosecute people when things go really wrong. In terms of domestic politics, Arthur Andersen-ing a company and putting thousands of people out of work is untenable. And in a globalized economy, you don't want to develop the reputation of being the country that puts rich people in jail.
      - ahomescu1 12y ago
        > And in a globalized economy, you don't want to develop the reputation of being the country that puts rich people in jail. If they've broken the law and are found guilty, that's exactly what you want (rule of law, equality before the law and all that). Otherwise, I agree with you.
        rayiner 12y ago
        The problem is that "[i]f they've broken the law" is not such a clear-cut question. Sometimes it is (WorldCom), sometimes it isn't (Qwest): http://www.cbsnews.com/news/top-10-ceos-in-prison-whyd-they-do-it http://www.cbsnews.com/news/top-10-ceos-in-prison-whyd-they-.... This is especially true with white collar crime, where the difference between legal and illegal activity often revolves around intent. There is definitely the potential for the government to use white collar laws to keep meddlesome rich people in line.
        ahomescu1 12y ago
        In the US, isn't that what a jury is supposed to decide? In other places, it's the judge's decision.

ahomescu1 12y ago

I think he hints at the solution: reduce regulation (he names Sarbanes-Oxley as one problem).

api 12y ago
If we did that, wouldn't people just run more Enron-type scams? Fraudsters and con men have been engaged in a Red Queen's race against investor intelligence and government regulation since there has been economies. https://en.wikipedia.org/wiki/Red_Queen%27s_Hypothesis https://en.wikipedia.org/wiki/Red_Queen%27s_Hypothesis These regulations might be messy but they contain valuable information that has been learned from this arms race. They're patches to try to prevent the same thing from happening again. It's much like computer security, where OSes and network protocols are constantly patched or re-engineered to be resistant to newer attacks. "Attacks only get better." It may however be possible to improve Sarbox by reducing its complexity, thereby reducing the complexity tax that harms smaller companies and discourages growth IPOs.
- ArkyBeagle 12y ago
  There's a big problem generalizing from Enron. Enron was more complex than that. There were two basic defects with Enron: 1) The energy traders were rogue by virtue of poor governance. The problem was baked into the compensation scheme there and could not be undone. 2) Skilling was rogue, but his sort of SPE manipulation was actually quite common. The rest of the company is believed to have been fundamentally sound. Enron was the big hero until they basically put CALPERS at risk. Then the story changed. I watched as the California energy deregulation unfolded. It was apparent that it would fail exactly as it did. There's a larger background of boom-bust globally but especially concentrated in the US for ( I think ) path-dependent reasons. See "Nation of Deadbeats" for a semi-historical treatise on the subject. This goes back to John Law and the Mississippi Bubble - but each is different. I don't get the feeling the whole subject is clearly understood. The dominant "left-right" beliefs are not helpful. The left believes regulation can fix it; the right thinks ... something else will ( usually a bland nod towards competition). Thinking about stability is quite new. It's not clear we know what we're doing.
- ahomescu1 12y ago
  > They're patches to try to prevent the same thing from happening again. Prevention by regulation IMHO creates as many problems as it solves because it punishes everyone involved, not just the guilty. I'm more in favor of prosecution (for fraud or insider trading, for example) as a method of prevention (where you just get punished for breaking the law after the fact).
  - rayiner 12y ago
    The problem is that there is little will to prosecute people when things go really wrong. In terms of domestic politics, Arthur Andersen-ing a company and putting thousands of people out of work is untenable. And in a globalized economy, you don't want to develop the reputation of being the country that puts rich people in jail.
    - ahomescu1 12y ago
      > And in a globalized economy, you don't want to develop the reputation of being the country that puts rich people in jail. If they've broken the law and are found guilty, that's exactly what you want (rule of law, equality before the law and all that). Otherwise, I agree with you.
      - rayiner 12y ago
        The problem is that "[i]f they've broken the law" is not such a clear-cut question. Sometimes it is (WorldCom), sometimes it isn't (Qwest): http://www.cbsnews.com/news/top-10-ceos-in-prison-whyd-they-do-it http://www.cbsnews.com/news/top-10-ceos-in-prison-whyd-they-.... This is especially true with white collar crime, where the difference between legal and illegal activity often revolves around intent. There is definitely the potential for the government to use white collar laws to keep meddlesome rich people in line.
        ahomescu1 12y ago
        In the US, isn't that what a jury is supposed to decide? In other places, it's the judge's decision.