Financial Market Competition
All politics are local
The government of Kazakhstan has announced that it will list the shares of its oil companies on the London stock exchange instead of New York. This is a shame: the largest single investment of “western” capital in the ex-USSR is in the Kazakh Tengiz oil field in the Caspian Sea. Until the passage of the Sarbanes-Oxley Act (SOX), US stock markets were seen as the most competitive. It is now becoming generally acknowledged that the costs of SOX outweigh the benefits and that jobs in New York are being lost to this anti-competitiveness.
In addition, SOX has other repercussions. Society as a whole loses when capital does not flow to its most efficient uses. With an added cost to listing equity, less equity is listed, and more means of production are kept private. This means that these assets will be more concentrated in the hands of the relatively wealthy instead of the general public. With more than 50% of Americans currently owning stock (mostly in pension funds) more people have a larger stake in the economy. SOX may put a damper on this trend if it has not already.
SOX was passed in attempt to prevent future Enron scandals. The corrupt will always be with us. Specific, targeted, public prosecution against fraud is the correct response, not the blunt instrument of unnecessary over-regulation. The politicians in Washington had to be seen to be doing something after Enron and Worldcom. They went too far this time (with apologies to my friends in the Washington regulation business).
The government of Kazakhstan has announced that it will list the shares of its oil companies on the London stock exchange instead of New York. This is a shame: the largest single investment of “western” capital in the ex-USSR is in the Kazakh Tengiz oil field in the Caspian Sea. Until the passage of the Sarbanes-Oxley Act (SOX), US stock markets were seen as the most competitive. It is now becoming generally acknowledged that the costs of SOX outweigh the benefits and that jobs in New York are being lost to this anti-competitiveness.
In addition, SOX has other repercussions. Society as a whole loses when capital does not flow to its most efficient uses. With an added cost to listing equity, less equity is listed, and more means of production are kept private. This means that these assets will be more concentrated in the hands of the relatively wealthy instead of the general public. With more than 50% of Americans currently owning stock (mostly in pension funds) more people have a larger stake in the economy. SOX may put a damper on this trend if it has not already.
SOX was passed in attempt to prevent future Enron scandals. The corrupt will always be with us. Specific, targeted, public prosecution against fraud is the correct response, not the blunt instrument of unnecessary over-regulation. The politicians in Washington had to be seen to be doing something after Enron and Worldcom. They went too far this time (with apologies to my friends in the Washington regulation business).
posted by Cameron Weber at 11:35 AM
