Keep Your Expectations for the Volcker Rule Low

A certain amount of fatalism always seems to creep in whenever the government promises a new fix for something perceived to be ailing the financial system and capital markets. Back in 2002, when Congress passed the Sarbanes-Oxley Act, the big problem was the auditing profession, which had been exposed as an oxymoron by Enron Corp. and other corporate frauds. Today the hot topic is the banking industry and the matter of proprietary trading, the definition of which is evolving.

After Sarbanes-Oxley was adopted, the Securities and Exchange Commission and a new regulator, the Public Company Accounting Oversight Board, passed a bunch of rules on everything from new audit reports on companies' internal accounting controls to new restrictions on the types of nonaudit services that firms could sell to audit clients. It would be hard to make the case today that audit qualityhas improved.