Required Reading

Worried about the seemingly “jobless recovery?” The blame, David Ignatius argues, may lie in Washington — but not for the reasons Johns Kerry or Edwards would have you think. Read:

Hoping to restore investor confidence, Congress passed the Sarbanes-Oxley bill, which required corporate chief executives, in effect, to take personal responsibility for what their underlings were doing in complicated financial transactions. That sounds great in principle, but in practice it has added to the wariness of CEOs, and probably reduced the job-creating dynamism of the economy.

One unintended consequence of the new rules is that they make it costlier for small start-up companies to go public. Ann Winblad, who is one of the principals of a big San Francisco investment firm, Hummer Winblad Venture Partners, estimates that for a company with $50 million in revenue, the extra cost of compliance could total $1 million to $3 million annually — when you add in the three required independent directors, the outside auditors, the internal auditors, the directors’ and officers’ insurance, and other costs.

Certainly the venture capital business reflects the new caution: Where 629 venture funds raised a total of $105.4 billion in 2000, last year there were just 113 funds that raised $10.8 billion. Warren Buffett, the iconic figure of American capitalism, expressed the new wariness in his annual report released Saturday. Noting that he’s sitting on a company-record $36 billion in cash, he explained: “Our capital is underutilized now. . . . It’s a painful condition to be in — but not as painful as doing something stupid.”

Now go read the whole thing.