It's amazing how short memories have become. Consider the two pieces of revisionist history of last week. First, that the Arthur Andersen accounting firm was done in by government prosecutors -- when in reality it committed suicide. Second, that departing Securities and Exchange Commission Chairman William Donaldson was an anti-business zealot -- when in reality, he was trying to protect Wall Street from itself and restore the public's faith in financial markets.

To understand my irritation, let's flash back to real history. Do you remember that a company called Enron collapsed in 2001? Do you remember that Enron's fee-hungry outside auditors -- yes, Arthur Andersen -- enabled the gigantic fraud because they wouldn't say no to their biggest client? Finally, do you remember how some of the nation's biggest mutual fund companies ripped off their long-term investors by allowing hot-money speculators to skim profits at their expense?

You should remember all this; it wasn't that long ago. Now, let's start with Andersen. Yes, the criminal prosecution of Andersen was overkill, because the company was effectively out of business the minute it was indicted. Last week's Supreme Court reversal is of symbolic value, but makes no practical difference.

Let's face facts, fans. There's no way Andersen could have survived even if it hadn't been indicted. It had shelled out major money to settle its screw-ups at Sunbeam and Waste Management. Settlements for its disasters at Enron, Global Crossing, Qwest and the Baptist Foundation of Arizona, to name a few, would have more than wiped out its partners' capital.

The government should have wiped out Andersen's capital and let the honest remnants re-form into a new company, rather than closing down the firm with a felony indictment. But if Andersen had done its job properly, it wouldn't have been vulnerable. The Supreme Court reversed Andersen's conviction -- it didn't bless the way the firm had acted.

This brings us to departing SEC Chairman Donaldson and his anointed successor, Rep. Christopher Cox (R-Calif.). I think Donaldson's obsession with having "independent" chairs of mutual funds and majorities of "independent" directors was overly legalistic and didn't address the fundamental problem of mutual funds treating investors as customers to be exploited rather than clients to be cherished.

I think he also made a mistake by giving the appearance of the government blessing hedge funds by requiring them to register with the SEC. But even if these specific things were wrong, Donaldson, a man of the market, had the right idea. The public had lost faith in the markets and in mutual funds, and the SEC had to look like it was doing something, in order to restore confidence.

With hedge funds becoming major players in the world, it was symbolic for the government to at least have their names and phone numbers. That way, when disaster strikes -- which it will -- the SEC will at least know whom to call.

Adam Smith, the avatar of free markets, talked about market participants acting in their own self-interest. But they often don't -- they grab what they can today without regard to the long term. Self-interest -- which takes the long term into account -- is good. Greed -- gobbling everything you can get today, and the devil take the hindmost -- is a sin.

Andersen's a classic example: Some partners acted out of greed, and destroyed the entire enterprise. Some mutual fund companies acted the same way: They put the entire enterprise at risk to make a few extra bucks of fees by allowing hot-money hedge funds to "time" their funds. Translated into English, that means they skimmed profits at the expense of the funds' other investors.

In an idealized world, no one would be so greedy and stupid. In the real world, they are.

One of the first changes when Christopher Cox becomes SEC chairman next month, I suspect, will be the SEC's ruling that companies must count the value of employee stock options as a business expense for fiscal years that start after June 15. For most companies, this means for 2006.

Many people -- among them capitalists like Alan Greenspan and Warren Buffett -- think that expensing options is essential to reporting honest numbers and giving the market accurate information. I happen to agree.

But Cox comes from Silicon Valley, which hates the idea of expensing options. His handling of this question will set the tone for his SEC reign.

The fall of Andersen (and many of the clients that it indulged) shows what happens when accountants forget the old Nancy Reagan line: "Just say no." I'm afraid the new SEC will fail to say no, too. If that happens, the uproar when the next scandal wave hits -- and there always is a next one -- will make the Enron uproar seem mild. And it will make corporate America and Wall Street wish that someone had restrained them.

Sloan is Newsweek's Wall Street editor. His e-mail address is

Arthur Andersen chief Joseph Berardino takes the oath before a February 2002 hearing on the Enron collapse.