While he didn't call for any new regulations, or outright suggest the overturning of any existing rules, in a speech this week Treasury Secretary Henry Paulson urged federal regulators to take a more hands-off approach when it comes to dealing with the markets.Speaking on the competitiveness of the capital markets at the Economic Club of New York, Paulson told the audience that U.S. accounting and securities regulators should consider adopting flexible accounting rules that outline principles, but don’t set strict rules.

"Rules by themselves cannot eliminate fraud," he said. "Wrongdoers will seek out loopholes or ways to circumvent the rules."

Paulson, the former chief of Goldman Sachs, stopped short of calling for the scrapping of the Sarbanes-Oxley Act, instead suggesting some fine-tuning to the law.

“Striking the right balance requires us to consider the economic implications of our actions,” he said. “Excessive regulation slows innovation, imposes needless costs on investors, and stifles competitiveness and job creation. At the same time, we should not engage in a regulatory race to the bottom, seeking to eliminate necessary safeguards for investors in a quest to reduce costs. The right regulatory balance should marry high standards of integrity and accountability with a strong foundation for innovation, growth, and competitiveness.”

Paulson also expressed concern over a decline of foreign IPOs in the U.S. market and the nation’s current legal system, which he said exposes market participants to significant litigation risk in its current form.

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