Executives Call US Securities Laws a Hindrance in World Capital Markets

By Naylor, Bartlett | American Banker, February 28, 1986 | Go to article overview

Executives Call US Securities Laws a Hindrance in World Capital Markets


Naylor, Bartlett, American Banker


WASHINGTON -- Tight American regulations hamper U.S. participation in the internationalization of the capital markets, financial executives told a congressional panel during two days of hearings that ended Thursday.

Some observers viewed the Senate Banking Committee hearings, which featured testimony from prominent figures in the world banking and securities industries, as a backdoor effort to line up support for deregulation, including the dissolving of the Glass-Steagall separation between the banking and securities industries.

"In order to assure continued leadership of our capital markets and of American financial institutions our laws must be updated," said Dennis Weatherstone, chairman of Morgan Guaranty Trust Co.'s executive committee.

American banks must be freed to compete with foreign banks in the U.S. securities markets, Mr. Weatherstone said. In an interview following the hearing, he stressed that Morgan's experience underwriting securities in Europe through a subsidiary has proven that the New York bank can be safely insulated from risk, and that the overall market is more efficiently served.

Where American banks has underwritten commercial paper in the U.S. market, Mr. Weatherstone added, "we're brought downr ates by six or seven basis points."

But Sen. Alfonse D'Amato, R-N.Y., a committee member and a defender of the ban on banks dealing in securities, warned against "blithely" advancing toward deregulation.

Among representatives of securities firms, Robert D. Hormats, vice president of Goldman Sachs & Co., said his industry could better compete in European markets if Securities and Exchange Commission reporting and rating requirements were relaxed.

Neither Mr. Hormats nor other securities and banking executives advocated dismantling the SEC. And though neither he nor others specified remedies, all advocated general relaxation. Deregulation abroad is siphoning activity from the U.S. market, Mr. Hormats said, and "Tokyo may be the financial center in the future."

According to a recent forecast by Arthur Andersen & Co., foreign investment activity in U.S. securities will increase from the present $134 billion to $167 billion by 1988, while U.S. investment in foreign securities will double from the present $30 billion to $60 billion.

Donald L. Calvin, executive vice president of the New York Stock Exchange, noted that about 10% of the transactions on his exchange last year originated abroad; on the Frankfurt exchange in West Germany, about 50% of the business was foreign, "much of it from U.S. investors."

In January, the SEC compiled comments from international financial firms on how global capital markets should be promoted. …

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