From the editor.

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 to throw its legal resources at almost anything that moves. In a July 26 op-ed article in The Wall Street Journal, Pitt took his old agency to task, saying, "the SEC's troubles can be traced to a mentality that often plagues regulatory bodies and legislative efforts: that any time a problem arises, the solution is to toss another regulation or statute at it."

As Pitt points out, two proposed rules that the SEC has made little headway with appear to be regulatory over-reaching--the attempt to force mutual funds to be governed by independent chairmen and the effort to regulate hedge funds. Both, many in the financial community believe, came as something of a turf-protection reaction following the stunning successes of New York State Attorney General Eliot Spitzer in his campaigns against hyped-up Wall Street investment research, after-hours mutual fund trading and other perceived abuses.

Of course, the SEC isn't the only agency under the gun--and sometimes Congress is rightfully implicated. Several banking laws coming out of the savings and loan scandals of the late 1980s were savaged by the banking community as overkill; at least one, the Federal Deposit Insurance Corporation Improvement Act (FDICIA), was commonly sneered at as "the lawyers' full employment act."

Notice that I haven't even mentioned the Sarbanes-Oxley Act, the bane of many a CFO in recent years. Most financial executives agree that there was a solid argument for the law, though they decry the costs, which far exceeded SEC estimates. But then again, the SEC staff is comprised mostly of lawyers and not accountants, right?