WASHINGTON – Treasury Secretary Henry Paulson said Tuesday a balance must be struck between ensuring the competitiveness of financial markets and protecting investors.
Paulson addressed a gathering of top business leaders and former government officials. The conference followed months of campaigning by American business for an easing of laws and regulations established after the Enron debacle.
Paulson said the laws and regulations have been, "extensive and significant, so it is quite naturally taking time for companies to understand, process and implement the new rules and requirements."
However, he said, "the principles behind them have been positive, as have many of the results."
Panelists included billionaire investor Warren Buffett, General Electric Co. Chairman Jeffrey Immelt, brokerage founder and CEO Charles Schwab, former Federal Reserve Chairman Alan Greenspan and New York Mayor Michael Bloomberg. Paulson and Christopher Cox, the chairman of the Securities and Exchange Commission, are serving as moderators.
In spite of the complaints, however, others warn that easing regulations may not be in the best interests of investors.
The conference comes as an array of companies and business leaders have claimed that the wave of corporate scandals in recent years led to overly burdensome and costly rules that have hurt the competitiveness of U.S. financial markets.
The conference likely will yield some proposals that can be acted on immediately, Paulson said, others will lay groundwork for possible longer-term action.
"There will be things we at Treasury, working with the regulatory agencies, will do in the near term and some other actions over a longer timeframe to address these challenges to our competitiveness," Paulson said in his opening remarks.
In November, a committee of business, legal and academic figures offered proposals to claw back corporate governance rules, class-action lawsuits against companies and auditors, and criminal prosecution of companies by the government.
A second group, formed by the U.S. Chamber of Commerce, issued a report this week calling for "quick and decisive adjustments in the U.S. legal and regulatory framework." Among its key recommendations: Public companies should stop issuing quarterly earnings guidance and policymakers should consider proposals to reduce the liability of accounting firms in litigation over company audits.
A target of the business campaign is the corporate financial-controls provision of the Sarbanes-Oxley anti-fraud law, enacted in 2002 at the height of the scandals that engulfed Enron Corp., WorldCom Inc. and other big corporations.
Some experts and regulators are warning against dismantling the scandal-inspired governance and financial requirements.
"A key component of investor confidence is a regulatory framework that provides strong investor protection," said Joseph Borg, head of the organization representing securities regulators in the 50 states.
"Some on Wall Street and in Washington are calling for weakening this framework," Borg said. "With record profits on Wall Street and the echoes of Enron still reverberating, rolling back a system of regulation that has vigorously protected U.S. investors for decades could have profound and costly consequences if it went too far."