(Bloomberg) Eliot Spitzer is a hero for turning over the stones in corporate America and stamping on the wriggly things crawling in the dark. Yet, economic history may judge the New York attorney general as more of a bane than a boon.

The unintended economic consequence of the breathtaking breadth of Spitzer?s investigations into Bermuda based companies, Wall Street banks, insurers, the music industry and undoubtedly more to come may be to frighten some US companies into becoming too risk-averse to invest in future growth.

It?s not just Spitzer who?s got company executives looking over their shoulders rather than scanning the horizon for new opportunities.

The chilly wind of change is also blowing through bookkeeping departments, as accountants try to work out how many beans make five after Enron Corp.?s attempt to use the answer ?four? prompted 2002?s Sarbanes-Oxley Act.

Stephen Roach, chief global economist at Morgan Stanley and perennial bear, said in October that one reason for his gloomy view of the economy is the ?unrelenting backlash of re- regulation in the aftermath of the roaring ?90s, underscored by Eliot Spitzer?s latest forays into the insurance and music industries, to say nothing of Enron-type accounting scandals, Wall Street?s travails and the Sarbanes-Oxley legislation?.

It?s not the first time we?ve heard the deafening sound of stable doors being slammed shut after a slump in the equity market. The stock market crash of 1929 prompted an investigation by the US Senate Banking and Currency Committee, which in turn sired three pieces of legislation to prevent trading abuses.

The Securities Act of 1933 required public corporations to file independently audited accounts, a stricture that accountants had wanted for at least three decades, and imposed controls on the sale and distribution of stocks.

The Securities Exchange Act of 1934 created the Securities and Exchange Commission, while 1935?s Public Utility Holding Company Act untangled the mess of holding companies being structurally far removed from the utilities they owned.

Ferdinand Pecora, the Eliot Spitzer of his day, handled many of the interrogations during the investigation. His fame soared in July 1933 during his grilling of eponymous banking scion J.P. (Jack) Morgan Jr., when he revealed that the financier hadn?t paid income tax in the previous three years.

While the regulations ushered in by the 1929 crash weren?t responsible for the Great Depression of the 1930s Milton Friedman?s accusation that the Federal Reserve?s failure to supply adequate liquidity to the banking system created ?a major catastrophe? is convincing they undoubtedly added new burdens to an economy already struggling to cope with the near-collapse of the banking industry.

In his 1963 study of ?America?s Great Depression,? Murray Rothbard argued that the US government?s interventionist policies, particularly with regard to stock market regulation, exacerbated the economic slump.

The government ?bullied? corporate America, Rothbard says, using ?the velvet glove on the mailed fist; businessmen would be exhorted to adopt ?voluntary? measures the government desired, but implicit was the threat that if business did not ?volunteer? properly, compulsory controls would soon follow?.

While nobody is suggesting the global economy is headed towards depression, the Organization for Economic Cooperation and Development cut its 2005 growth forecast for its 30 members to 2.9 percent, down from its May prediction of 3.3 percent.

It estimates US growth will slow to 3.3 percent next year, from 4.4 percent this year.

Some 198 firms opted to deregister in the US in 2003, the year after Sarbanes-Oxley was introduced, up from 67 in 2002 and 43 in 2001, according to a November research paper by Christian Leuz, an accounting professor at the University of Pennsylvania, and Alexander Triantis and Tracy Wang at the University of Maryland.

More companies are delisting their common stock, known as ?going dark,? to avoid ?higher audit and legal fees, new internal control systems that need to be implemented, higher director and officer insurance premiums, and a host of other expenses associated with compliance,? the study says.

Christopher Bland, the chairman of BT Group Plc., says he?d delist his company?s shares from the US if he didn?t have so many US shareholders to worry about, because it costs the U.K.?s largest phone company more than $18 million to comply with Sarbanes-Oxley.

?That?s a lot of money and it?s not money well spent. I think they?ve just gone too far,? Bland said in an interview with the Financial Times last week. In the financial industry, banks have boosted spending on enforcing anti-money-laundering regulations by 61 percent in the past three years, according to a September survey of 194 banks around the world by accounting firm KPMG International.

The push for higher standards to repent past evils may drift into over-regulation, stifling innovation. When the SEC dons its deerstalker and starts waving its magnifying glass over the pension accounts of General Motors Corp. and Ford Motor Co., you have to figure that the odds of that new production line getting built or that less-polluting engine getting developed grow just a little bit longer.

?It?s not just your name on the line,? says an advertisement for business-software maker Hyperion Solutions Corp. on page 96 of last week?s Economist magazine, featuring boxes for a CEO and chief financial officer to make their mark. ?If you sign it, it better be right. But what?ll make you feel as confident as you are accountable??

The ad doesn?t say what the executives are signing off on. It could be an earnings report. It could be an SEC filing.

Or it could be a purchase order for a new factory, or an agreement to hire 5,000 new workers to develop a new market. In which case, in the current environment, ?what?ll make you feel as confident as you are accountable? might be not signing the thing at all.

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