From the editor.

• Author: Marshall, Jeffrey
• Position: Financial services - Sarbanes-Oxley Act of 2002 - Editorial

You know the lyrics to the old song, "Everything old is new again?" That's not quite true about financial regulation, but it does seem that issues and proposed corrections get recycled, though perhaps in different form and aimed at slightly different targets. Glenn Cheney's article in this issue on the history of regulation in the past three generations, part of our FEI@75 series, does a good job of tracing the triggers for governmental action. Of course, the granddaddy of them all, the 1929 stock market crash, gave us some of the most lasting--and most respected--rules and regulatory bodies, among them the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corp. (FDIC).

One of the strongest voices in Cheney's article belongs to Lynn Turner, the former SEC chief accountant and now managing director of research at Glass, Lewis & Co. Turner has long been a harpy about contemporary accounting practices, but he also aims a few well-honed barbs about the cyclical nature of regulation.

According to Turner, weak or unclear accounting standards are often the root cause of many financial messes. What happens, he argues, is that "people keep making compromises." He identifies three reasons for these perpetual problems: technical complication, corporate meddling and an inability to write a standard in plain English that reflects economic reality.

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These substandard standards, in Turner's view, help trigger corporate scandals, which result in economic recession, which inspire reforms and new regulation, which result in new standards. These then bring about economic recovery, which allows compromises, which lead to new problems with standards. Turner's analysis seems dead-on--and as inevitable as snow in the Rockies.

Another recurring theme in the recent history of regulation is what former SEC Chairman Harvey Pitt refers to as "over-lawyering": the seeming need for government...