Questions for the Committee on Capital Markets Regulation

At the Financial Times, there is an "Ask the expert: US capital markets" where you can ask Glenn Hubbard questions about the recent report recommending that regulations be changed to, among other things, make it more difficult for shareholders to file lawsuits:

Ask the expert: US capital markets: Q&A: US capital markets The committee on capital markets regulation, chaired by Glenn Hubbard, a former economic adviser to President George W. Bush, has recommended that companies and auditors should be better protected against costly shareholder lawsuits to stem the tide of litigation endangering the competitiveness of US markets

The findings of the influential group are part of wide-ranging efforts by business leaders and politicians to rein in a regulatory and legal system they say is stifling the ability of the US to compete with financial centres such as London and Hong Kong.

The committee also calls for excluding small companies from some of the more demanding provisions of the Sarbanes-Oxley legislation.

Mr Hubbard will be online for an hour on Tuesday from 12pm GMT (7am US eastern time) to answer readers’ questions on why US capital markets have fallen behind.

Post a question now to ask@ft.com or use the online submissions form below.

I used the submission form:

Dear Dr. Hubbard:

Thanks for the opportunity to ask questions. I have several:

1. Given that the Committee on Capital Markets Regulation received $500,000 from the C.V. Starr Foundation, a group with strong ties to Maurice R. "Hank" Greenberg, the former AIG chief who is fighting civil charges filed by the New York attorney general, and given that two other committee members, Wilbur L. Ross Jr and Kenneth C. Griffin, contributed a few hundred thousand dollars more, why should we believe the Committee was independent? Is it a coincidence that the committee's findings are favorable to the donors?

2. Can you describe how the interests of investors, the public, businesses, etc. were represented in the make-up on the Committee? For example, who represented the interests of individual shareholders on the Committee?

3. What empirical work is available to support the Committee's recommendations beyond what is in the report? Is there a substantial body of work published in academic journals to support these recommendations? Or are they based upon a narrower set of papers that have not been thoroughly checked for robustness?

4. Echoing Larry Summers, will you encourage the administration to "focus as intensely on helping the American manufacturing, American agriculture and American health-care industries as it is on this particular aspect of financial services"? What steps can you point to that the administration has taken to help with these problems?

Thank you,

Mark Thoma
Eugene, Oregon

I have more questions, but didn't want to overdo it. If you have questions for Dr. Hubbard, the form is here.

Comments

[save_the_rustbelt]

Apparently, integrity is a hindrance to profits.

I will stipulate that the regs could be tidied up a bit and the litigation market is wierd (the largest plaintiffs firm in this area currently being under indictment) but the idea that honesty is a drag on agency is just crap.

I rewatch the Enron movie once a year, just as a reminder of what can be. Pride goeth before the fall.

[evagrius]

What's the definition of a "small company"?

[save_the_rustbelt]

In some proposals "small company" is less than $75 million annual revenue (keeping min mind this is dealing with public companies, so $75m is likely a start up).

[lonesome moderate]

To me, the most depressing thing about Hubbard's claims is that they probably are largely true. No doubt there are many world financial centers that are even more corrupt than ours are, and offer companies even more opportunities to do pretty much anything they want with their shareholders' money, worry-free. I wonder--are there any major stock markets in the world that are currently considered to offer investors reasonably good safeguards against investors being swindled by fraudulent companies, the way American markets were ten or fifteen years ago? As best as I can tell there's little effective protection for the small investor in any of them, which leaves most of us better off putting our money into bonds and hard assets.

[calmo]

0. By what miracle in heaven's name is an Industry representative not chairing this committee?

0.5 Is Glenn Hubbard the low cost bidder for this job?

1.5 Surely those donations to the committee are heart felt, given how difficult times are for those large US companies whose fortunes are being eroded as we speak. Can the committee glean for these starving contributors what funds they are prepared to donate to the Senate to ensure a fair hearing?
5. Given the recent splurge in M&A and LBO conducted by the usual US financial companies, is there another category of companies besides 'small' and 'large' that citizens everywhere need to know about?

[Ken Houghton]

In order, calmo (but not trying to retain your numbering sequence):
(1) We needed to maintain some appearance of not being an industry tool
(2) Yes. But we only offered the job to Hubbard and Greg Mankiw.
(3) That is beyond the scope of our investigation. Please consult the appropriate lobbying firm(s).
(4) "Built to Last," but we don't believe you need to know about those, since they not capital-markets dependent to the extent of, say, GE.

[calmo]

But Ken I was augmenting MT's list, thinking it was too good to mess with...this numbering business is not as random as it appears... I am not as innumerate as it looks.... I think I'll give the numerate points a rest...sigh.
Ok, bear with me now knowing I don't have a TV, "Built to Last" --Ford right? (second guess: Ever Flush toilet fixtures)
The appearance of oversight is as important as the justice appearing to be done. [ie It is not enough that justice be done, but that it also appear to be done.] Several magnitudes higher for oversight with less emphasis on the being done bit.
I see some hope though (and reason for this clownshow here):
http://www.nytimes.com/2006/12/03/business/yourmoney/03whistle.html?_r=5&ref=business&oref=slogin&oref=slogin&oref=slogin&oref=slogin&oref=login

[calmo]

That link once more:
http://www.nytimes.com/2006/12/03/business/yourmoney/03whistle.html?_r=5&ref=business&oref=slogin&oref=slogin&oref=slogin&oref=slogin&oref=login

[calmo]

Alright, be nasty linkitis.
google: bobby maxwell --News

[JamesG]

Actually Calmo when you cut and paste these links they work even though they look cut off.

[lonesome moderate]

Well, I had to snip calmos's link, NYT adds a lot of cookie stuff to their URLs that seem to make them impossible for others to use. If you want to have a link that you can share with others the best way is to mail it to yourself using their "email" feature. Here's a link that worked for me:

http://www.nytimes.com/2006/12/03/business/yourmoney/03whistle.html

Interesting article, btw. When things get as corrupt as they have under the Bush administration, sometimes the whistleblower law is the only hope.

[nr]

Thoma's first two points are samples of the logical fallacy known as "ad hominem," i.e., asserting a negative trait in a speaker as evidence that an argument is false. they're no more substantive than saying "you're argument is dubious because you look like Hitler." If you have a valid criticism, attack the argument, not the arguer or his motives. Thoma's weak start sucks any credibility out of the latter two points.