Wharton Journal

Issue date: 3/19/07 Section: Perspectives

U.S. Treasury Secretary Henry Paulson

What do you get when you put Alan Greenspan, Warren Buffett, Robert Rubin, Michael Bloomberg, Charles Schwab, Paul Volcker, Jeffrey Immelt, and Jaime Dimon all on one stage? The U.S. Capital Markets Competitiveness Conference held last week at Georgetown University in Washington, DC.

The gathering of the financial illuminati, convened by Secretary of the Treasury Henry Paulson, is the latest step in an ongoing effort by Wall Street and the Bush Administration to take a comprehensive look at why U.S. capital markets seem to be losing business to international arenas.

The conference, first announced by Paulson in November, was the culmination of a steady drumbeat of well-choreographed reports by business and political groups questioning whether the United States has struck the right balance between investor protection and market competitiveness.

The first study, by the Committee on Capital Markets Regulation, headed by former Bush economic advisor Glenn Hubbard, was released in December and calls for some rollbacks of the post-Enron Sarbanes-Oxley legislation and for reducing class action securities litigation. A subsequent study conducted by McKinsey for New York Mayor Michael Bloomberg and Senator Charles Schumer warned that the United States faces losing its position as the world's leading financial center within a decade if changes to the regulatory and legal environment are not made. Last week, a third report by the U.S. Chamber of Commerce, corporate America's lobbying organization, called for "quick and decisive adjustments in the U.S. legal and regulatory framework" starting with reform of the SEC.

Though the alleged culprits were fairly clear - over-regulation and a litigious business environment - a laissez-faire lovefest the Georgetown Conference was not. Paulson was accompanied by several Bush Administration critics, like former Clinton SEC Chairman Arthur Levitt, during his address on these matters. Paulson's remarks evolved into an open and candid discussion with strong and differing opinions held by some of the most respected minds in business, government, and academia.

There was widespread agreement from all sides that, because regulation progresses in piecemeal, it is worth re-evaluating from time to time as a whole in terms of costs and economic benefits. Moreover, even advocates for reform were circumspect about the need for regulation. As Buffet explained, in the wake of Enron and WorldCom, "the reaction has been quite understandable. It's like golfing when you hit two balls to the left and the caddie says to aim to the right."

Continued...

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