Major legislation in Congress usually takes a lot of time and sometimes years.  After the bill passes each house, and before it goes to conference, there is plenty of time for the staff to examine the proposed legislation and see if there are any unintended consequences.  There is also generally a long period after the conference committee agrees on the bill to carefully examine the legislation before it goes to the floor for a final vote.  Major legislation is extremely complex and, under the best of circumstances, should be passed in a calm and dispassionate atmosphere.  Even under those circumstances, the Congress usually has to pass "technical amendments" at a later time to straighten out unforeseen problems.

This orderly process has not and will not happen with the Security reform legislation.  This legislation is necessary.  Corporate crime must be punished.  The perpetrators, instead of wearing pinstripes, should wear prison stripes.  Wrong doers must be made to pay, not just in dollars, but in time in jail.

There is a race to pass the legislation.  Each party is outbidding the other in terms of being tough.  Senator Sarbanes' (D-MD) bill has the momentum and will be approved by the conference committee without many changes.  Many parts of the Senate bill were added by amendments on the floor at the last minute without much debate and little staff research.  For instance, Senator Schumer (D-NY) added Section 402, which states that no loans or extension of credit can be given to a director or officer.  This is an important measure, but does it go too far?  Does it mean that corporate credit cards or relocation loans are illegal?  Another provision requires certification of periodic reports to the SEC by the Chairman of the Board, CEO and CFO.  However, that creates some practical problems.  Assume that the Chairman of the Board is a salesman who came up through the ranks and is not a trained tax attorney or accountant.  The only way he can certify such reports is to turn to the people under him who know these issues and get their assurance that it is correct.  Yet, as we have seen recently in some cases, these are the very people who were acting illegally.  This legislation may be so tough that few will be willing to serve on a board or be a CEO or CFO of a company.

In politics, the pendulum is very rarely in the center, normally just passing through.  The Congress and Administrations, both Democrat and Republican, have not taken action in the past regarding corporate malfeasance. President Bush introduced legislation in March, but it was ignored until the WorldCom crisis.  Now the pendulum is pegged to one side.  The President has no choice but to sign the bill as it comes from the Congress.  The bill will have many needed provisions.  Auditors will be independent.  Reports must be certified.  Loans will be barred.  Whistleblowers will have added protection.  Disclosure requirements will include off balance sheet material transactions and the SEC will get more people and dollars to do its job.  These are all-important and necessary changes.  But just one word of caution: If we destroy the ability of corporate officers and directors to do an honest job in an environment where there is never certainty, we will severely injure our free-enterprise system.  If we pass laws so strict that it is not worth the risk to be a public company, or to serve as an officer or director, or seek public money, our economy will suffer.  Right now, Congress is in a political survival mode.  Facts are secondary to perception.  No one wants to be perceived as opposing this legislation.  The legislation will be modified in 2003 when the atmosphere is less intense.  This is not the best way to legislate, but under the circumstances, the only way.