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US Markets Must 'Learn From London'

December 01, 2006

By Walter Olson

A new report highlights the reasons for the US financial markets' declining influence, but does the new Congress have the will to reform Sarbanes-Oxley?

Influential voices decry Sarbanes-Oxley

That was the message from yesterday's much-awaited report by an expert panel on the competitiveness of the country's financial markets convened by Henry Paulson, the Treasury Secretary. The Committee on Capital Markets Regulation was led by Glenn Hubbard, the former Council of Economic Advisers chair who is now dean of the business school at Columbia, and other blue-ribbonish law and finance types. Among its findings:

Among other recommendations: Washington should provide more safe harbors for executives, directors and auditors seeking to behave lawfully, and curb "catastrophic" damage awards against auditors; shareholders should be free to strike deals with managements to resolve disputes through arbitration, rather than jury trial; class-action lawyers should not be allowed to lure public pension funds as clients by greasing politicos with campaign donations.

Early reports of the committee’s deliberations sent the class-action bar into conniptions and likewise provoked a series of articles in The New York Times decrying the whole project as a plot against investors and the public interest. What’s more, the new Democrat Congress is likely to find business bashing more appealing than restricting litigation.

On the other hand, Chuck Schumer, the New York Senator who became a hero to Democrats after masterminding their national campaign to regain control of the Senate, endorsed the general case for reform in a much-buzzed-about opinion piece in The Wall Street Journal co-authored with Michael Bloomberg, the Mayor of New York City.

The latter, a nominal Republican, knows much about financial mobility himself as pioneer of the "Bloomberg screen", which lets traders work efficiently from Malibu to Hong Kong. For these two officials, the menace of capitalist flight is deeply local: the securities trade contributes more than 20 per cent of wages in New York City and nearly the same share of taxes paid to New York State.

New York's other highly visible elected official, Hillary Clinton, has conspicuously kept her distance from the cause of reform. Could one of her constituents perhaps approach her, before the tumbleweeds arrive?

Original Source:



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