Talk about fiddling while Rome burns!

The slowly unfolding disaster of the subprime lending industry hits US stocks and markets worldwide, but the Bush administration and CEOs seem to think the real problem with the US economy is regulation. Go figure!

The drive to water down Sarbanes-Oxley keeps going. Speaking at a conference this week sponsored by the Treasury Department, Treasury Secretary Hank Paulson said it was time to reassess Sarbanes-Oxley. Paulson also said the accounting profession needed to be looked at more closely. More in this news report. Or if you want, you can check out his speech.

All this coincides with the US Chamber of Commerce releasing its blueprint for change. Basically, the chamber wants to give the Securities and Exchange Commission power to issue rules and exemptions for Sarbanes-Oxley. Something that makes perfect sense, and should have been done years ago.

The chamber however is no friend of Sarbox and obviously expects the regulator to swing a certain way.

It also wants, among other things, an end to quarterly earnings guidance and introducing measures that would allow audit firms to raise money from shareholders, other than audit partners. interesting suggestion. The question is whether that would leave firm hostage to other forces.

How likely is this to happen? Watch this space but the push is definitely on.

And that's a worry because the real problem with the US economy is not regulation. The market is telling us that.

What's happening now is the hangover from the real estate lending spree of the first half of this decade, culminating in all those loans to borrowers who didn't make enough money to meet the monthly payments. And that tells us a lot about the problems in the US economy. The biggest problem in right in the US now is a housing market that seems to be in retreat. That cuts into consumer wealth, which is built up so so precariously on debt raised against housing equity. Combine that with retail sales down and job growth falling to its lowest in two years and you start to worry.

Someone better tell corporate America and Treasury that the real problem with the US markets has nothing do with regulation. And switch the light off on the way out.