Cyrus Dugger

Nader Blog: Don’t Let Wall Street Off the Hook

From the Nader Blog:

Don’t Let Wall Street Off the Hook

It takes no small amount of hubris for Wall Street hucksters to urge financial services deregulation.

But if there’s one thing that the Wall Street power brokers do not lack, it’s audacity.

Wall Street leaders have established a series of self-empowered commissions — among them the Commission on Capital Markets Regulation (the “Paulson Commission”), the U.S. Chamber of Commerce’s Commission on the Regulation of the U.S. Capital Markets — to peddle a fantasy story to the public and policymakers. This is their fantasy: U.S. competitiveness in financial services is now in grave doubt. Regulation, litigation and prosecution are driving companies to float their IPOs (Initial Public Offerings) on foreign markets. If something isn’t done soon, U.S. economic performance is in jeopardy. Give me a break.

In the real world, things look quite different.

First, a disinterested observer might comment that securities regulations exist to protect investors, not to enhance the interests of Wall Street. Wall Street is supposed to serve business and investors, not the other way around.

Second, the much-touted decline in U.S. IPOs is deeply misleading. The regulatory and litigation climate is a small and insignificant factor in the rising percentage of IPOs undertaken outside the United States. The real issue is that other countries’ stock markets are strengthening, and most recent IPOs were done by companies outside the
United States.

Indeed, a devastating January 2007 White Paper from Ernst & Young looking at every IPO in the first half of 2006 found that 90 percent were conducted in the launching company’s home country. Of the remaining 10 percent, only a few were “in play” — most went to regional markets, or were small-caps that went to the London Alternative Investment Market. Of the IPOs in play — a grand total of 17 for the first six months of 2006 — about two-thirds were listed on U.S. exchanges.

Most fundamentally, though, the IPO statistic is a chimera. What matters to the U.S. economy is whether businesses are investing in the United States, not where they undertake IPOs. That’s a narrow Wall Street consideration.

Third, although the doom-and-gloom rhetoric of the capital markets commissions might suggest otherwise, Wall Street is in fact doing fabulously well. Goldman Sachs CEO Lloyd Blankfein grabbed a $53.4 million bonus, the largest single annual executive bonus in Wall Street history. Blankfein’s bonanza is a sign of the times. Wall Street bonuses totaled $23.9 billion in 2006, according to the New York State comptroller, up 17 percent over 2005. And it is the NYSE and Nasdaq that are buying foreign exchanges, not vice versa. (keep reading)

Posted at 9:56 AM, Feb 13, 2007 in Permalink | Comments (0) | TrackBack (0)