Cramer says, "It [the merger] is imperative for the survival of the venerable Wall Street institution; and why it is imperative can be expressed in one word: Washington." For evidence, Jim supplies the statistic that out of 24 business enterprises recently seeking over one billion dollars in capital, 23 of them listed in countries other than the United States. They did this because they wished "to avoid U.S. regulation by raising capital overseas."

He chastises the House of Representatives and the Senate for passing the Sarbanes-Oxley bill, stating that it costs corporations millions of dollars without providing any significant gain to stockholders. I agree with Mr. Cramer on this point. As I have said in previous columns, Sarbanes-Oxley adds very little protection because the provisions are ineffective or beside the point or because the securities laws already include the items.

An example of the former is the requirement to have a majority of the board directors as public directors (as opposed to those connected with the business entity). In passing SOX, the Congress ignores the fact that Enron fulfilled this provision. Having most of their directors as outsiders did not help Enron’s shareholders, and I doubt it will necessarily help anybody else.

SOX also criminalizes a CEO’s signing the 10-K when he or she knows there is an accounting problem contained within the financial statements. But, litigation releases issued by the SEC during the 1990s reveal the SEC’s ability to charge CEOs for carrying out this behavior. Likewise for a CEO’s defrauding the external auditors. These provisions of SOX were not necessary because the SEC enforced them years before Congress passed the bill.

The danger in this analysis by Jim Cramer is that one can take it too far. While overregulation is a problem in the U.S., as seen in Sarbanes-Oxley, underregulation can also rear its ugly head, as it did during the 1920s. With a Darwinian vengeance, the stock markets at that time wreaked havoc on the small investor, as manager after manager thought it his or her duty to pillage those so stupid as to invest in their company. Corporate executives did not value the capital providers, but took them as suckers.

Fundamentally, the question is whether our society desires for corporations to raise money from the small investors, and it seems that we have answered that issue affirmatively. Congress passed the securities acts of 1933 and 1934, which did postulate that investors should face a fair game when they put funds into stocks or bonds. Even then, it took a couple of decades before small investors returned in sufficient numbers to supply a substantial amount of funds to corporate America. We could, of course, change this assumption and de-criminalize stock fraud. If we do, I shall withdraw my funds immediately and put them someplace other than the stock or bond markets.

As an aside, Cramer is correct when he derides the system for allowing investors to sue managers just because they missed a forecasted earnings number. The political system has no business insuring stockholders from investment risk; after all, investment risk is what individuals accept when they buy stocks and bonds.

So, Jim, the question for you to consider is whether we should design capital markets so that the billionaire gamblers to which you refer will be interested in American markets or whether we should design them for the average investor. Too much regulation will undoubtedly send the billionaires to freer pastures; however, too little regulation will drive the little guys to seek safer havens, like lottery tickets.