I can’t recommend highly enough the opinion piece in the Wall Street Journal this morning “The SEC’s Facebook Fiasco,” by Jonathan Macey. (http://professional.wsj.com/article/SB10001424052748703954004576089840802830596.html?mod=WSJ_Opinion_LEFTTopOpinion&mg=reno-wsj) I have written something myself on the issue: see “The Pace of Financial Overhaul.” (http://seekingalpha.com/article/247281-the-pace-of-financial-overhaul)
Macey sticks with the problems of the SEC and the regulatory structure and philosophy that surrounds it. But, the points he makes are also directly applicable to the regulatory structure and philosophy that surroundsl the laws and regulations impacting financial services and financial markets.
Let me restate some of the points that Macey makes and then add a couple of my own.
1. Banking has become so international that companies can side-step rules and regulations with ease.
2. Many of the rules and regulations that exist are crippling for United States financial transactions.
3. Banks have been moving brokerage and banking business offshore for decades. They are well positioned in Asian and European capitals to continue to do so.
4. The whole capital formation process is moving offshore.
5. The number of United States companies listing their shares for trading and doing business exclusively in foreign markets has risen steadily for the past five years.
6. Banks have to conduct the business they currently do in the United States so that they can avoid more egregious and intrusive regulations in the future.
7. In an effort to protect the unsophisticated small investor, rules and regulations are driving banks to provide “good deals” to wealthier clients avoiding where ever they can the less wealthy.
This is a pretty good list, but let me just add three more to it.
8. The rules, regulations, and economic policies of the United States over the last fifty years has created an environment that benefits the larger institutions and has made it more and more difficult for smaller financial institutions to survive. The larger institutions are the ones that are more capable of acting in the way described in the previous seven points listed above.
9. More and more assets in the United States are held by foreign banks than ever before and foreign banks are actually being encouraged to acquire banks within the United States, especially troubled banks. These foreign banks already have an international presence.
10. The application of more and more information technology to the financial services industry is just going to accelerate all the movements listed in the above nine points.
Macey closes his opinion piece by stating that the review of regulations proposed by President Obama should include the rules “promulgated by the SEC, lest we continue to see U. S. capital markets fade into irrelevance.” I believe that Mr. Macey’s statement can be broadened to include the rules and regulations applying to financial institutions and financial markets in general.