After raising the alarm some months ago over what he termed a crisis of competitiveness facing Wall Street, and endorsing the recommendations of a blue ribbon committee on capital market reform, U.S. Treasury Secretary Henry Paulson recently formed —you guessed it— yet another committee to look into the problem. Crisis? The only crisis is the chronic inability of Bush administration policy makers, eager to do Wall Street’s bidding, to acknowledge that higher standards of ethics, transparency and accountability serve the interests of North American investors and long-term confidence in capitalism. Wall Street has never liked reforms, whether they arrived in the form of the Pujo committee of the early 1900s, the Pecora commission of the 1930s or Sarbanes- Oxley in the 21st century. As Ferdinand Pecora wrote nearly 70 years ago, “Bitterly hostile was Wall Street to the enactment of the regulatory legislation.” It has not changed — thus the efforts to roll back and ease recent reforms in the guise of answering a competitive crisis. Secretary Paulson, it will be recalled, came to office last June fresh from his post as CEO of Goldman Sachs.
The problem is that even Wall Street and its high-placed friends realize it is difficult, during a period of unprecedented earnings and bonuses, as well as record Dow Jones levels, to make such a case. Rather than just admitting their folly, another committee seems the best way for them to beat a fast retreat.