Fed Gov. Warsh says regulatory uncertainty has had impact
Financial control reporting provisions contained in the Sarbanes-Oxley Act are one reason U.S. companies are hoarding cash at unprecedented levels during this economic expansion, said Federal Reserve board governor Kevin Warsh on Tuesday.
"Based on evidence available to date, I believe that the uncertainty resulting from the regulatory and legal environment has had meaningful economic implications for business investment and cash holdings," Warsh said in a speech at the American Enterprise Institute, a conservative think-tank. Read full text of Warsh's remarks.
The ratio of cash to investment at non-financial corporations has jumped to more than 150% by year-end 2004 after averaging 60% during the past few decades, Warsh said. The jump occurred as investment has fallen fall short from operations and net financing.
Warsh said there are many other factors behind the record high holdings of cash by the corporate sector.
But some critics of Sarbanes-Oxley law, in attendance at the speech, immediately welcomed his remarks as further proof that the legislation is hurting business.
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