WASHINGTON (Bloomberg) — US Treasury Secretary Henry Paulson said a thicket of accounting and governance rules may pose a risk to the US economy, and he plans to host a conference early next year to sort through the issue.“While necessary,” new accounting rules “are being implemented in a way that may be creating unnecessary costs and introducing new risks to our economy”, Paulson, the former head of Goldman Sachs Group Inc., said in a speech yesterday in New York.

Paulson, in his first remarks since the Democratic Party took control of Congress in elections earlier this month, said the Conference on Capital Markets and Economic Competitiveness will cover regulations and US accounting and legal systems. The goal will be to spark “bipartisan discussion” on needed changes, he said. He didn’t recommend new legislation.

Paulson’s comments come as Wall Street and both Republican and Democratic officials express concern that the US risks losing its lure as the world’s top financial market because of costs associated with complying with US accounting rules. Barney Frank, the Massachusetts Democrat in line to take over the House Financial Services Committee next year, said last week that the law can be “relaxed” without hurting its integrity.

The US accounted for 20 percent of all initial public offerings last year, down from 35 percent in 2001, according to the Financial Services Forum, which represents the country’s largest banks and insurers. None of the ten biggest stock offerings listed in US, the Washington-based Forum says.

The extra cost of complying with US corporate-governance and accounting rules “may not be a worthwhile expense for a foreign company considering the US market”, Paulson said.

Arthur Levitt, former chairman of the Securities and Exchange Commission, said that argument is overstated. Many of the companies that listed elsewhere never should have been listed in the US, he said.

“Their governance is so inadequate and their oversight is so wrongheaded that it is a disservice to U.S. investors to have them listed,” Levitt said in an interview. Levitt is a member of the board of directors of Bloomberg LP, the parent company of Bloomberg News.

The Sarbanes-Oxley legislation, which introduced stricter accounting rules and stiffer penalties for financial crimes, receives much of the blame for driving new listings overseas.

“Unless we improve our corporate climate, we risk allowing New York to lose its preeminence in the global financial services sector,” New York Mayor Michael Bloomberg and Charles Schumer, a Democratic Senator from New York, wrote in the Wall Street Journal on November 1. “This would be devastating both to our city and our nation.”

Bloomberg is the founder and majority owner of Bloomberg News and parent Bloomberg LP.

A study by Boston-based AMR Research estimated in March that companies will spend $6 billion this year complying with the rules. The Business Roundtable, which represents executives from the US’s biggest companies, says 40 percent of its members will spend more than $10 million each complying with Sarbanes-Oxley.

While the changes were necessary to rein in abuses, the new regulations can be implemented in a looser manner that doesn’t force companies to spend more on accountants than on research, Paulson said in the speech to the Economic Club of New York.

“At this time, I do not believe we need new legislation to amend Sarbanes-Oxley,” Paulson said. “Instead, we need to implement the law in ways that better balance the benefits to the legislation. With the very significant costs that imposes, especially on small businesses.”

A lack of competition in the accounting industry might also be adding to companies’ burdens, Paulson said. “We have been left with only four major accounting firms, each of which is exposed to potentially large legal liabilities,” he said. “This may not be healthy.”

House Financial Services Committee Chairman Michael Oxley and Democratic Senator Paul Sarbanes drafted the legislation in the wake of wake of corporate scandals at Enron Corp., which wiped out more than 5,000 jobs and $1 billion in employee retirement savings, and WorldCom Inc., which cost shareholders and bondholder as much as $40 billion.

Both Oxley, a Republican from Ohio, and Sarbanes, a Maryland Democrat, are retiring at the end of the year.

“It may have gone too far, Frank said in an interview on November 17. “Let’s see if we can reduce the burdensome aspects without in any way interfering with its good points.”

The SEC is scheduled next month to consider guidelines that may simplify audits of smaller companies.

Paulson also said his department would continue to study the implications of the growth of the hedge fund industry, where assets under management have tripled in the past five years to more than $1 trillion.

“Given their explosive growth, the instruments they trade and the evolution of our financial marketplace, we must continually assess their actions and impact on the market,” Paulson said.

Paulson repeated the administration’s objective of curbing litigation, which he said cost a record $250 billion in 2004, twice as much as Germany and Japan in proportion to the size of gross domestic product. “The broken tort system is an Achilles heel for our economy,” Paulson said.