Newsflash: Washington Doesn’t Always Understand the Way Wall Street Works
According to Senator John Sununu (R-NH), many lawmakers in Washington donít understand the way the financial markets work.
Speaking at the Securities Industry Associationís June 24 soft dollar conference in New York City, Sununu told the largely sell-side audience that "in Washington, there really arenít a great deal of people who understand this industry particularly well." The reason, he said, is that not many people come out of the financial services field to work as policymakers in Washington (presumably, Sununu was not referring to his colleague on the Senate Banking Committee, Senator Jon Corzine (D-NJ), former co-chair and co-CEO of Goldman Sachs).
The "ignorance, or a lack of information," among lawmakers "is a challenge," said Sununu. "Even those who do understand financial services donít always vote right," he added. He praised the SIAís efforts to educate lawmakers, calling the groupís work "important."
Sununu is a mechanical engineer by training, but also sports a Harvard MBA.
During his remarks, Sununu confirmed that the Senate Banking committee was "very unlikely" to take up mutual fund reform legislation this year. He praised Senator Richard Shelbyís (R-AL) deliberative approach in scheduling a series of hearings with a "keen eye towards understanding whatís happening in the industry [and] what the SEC is doing."
Sununu expressed a favorable view of soft dollars. "The name Ďsoft dollars,í" he said, "unfortunately doesnít really convey the most positive sense of the value thatís being derived." Sununu said that the Senate Banking committee is not going to "throw ourselves into this," but is going to "watch and wait" to see what the SECís soft dollar task force proposes. Soft dollars, he said, is the type of complex issue where lawmakers "need to exercise great caution."
What would Sununu do about soft dollars? He said that it would be "helpful to encourage disclosure." In his view, however, the most important issue is that independent research be kept on equal footing with proprietary research. "We need to be especially careful that we not try to decide which of these products . . . is better," he said. Lawmakers shouldnít pick winners or losers "in an industry that we donít understand in the first place."
Sununu warned that the Senate Banking committee would step in "if the SEC proposes rules that go too far in undermining competitive options in the marketplace" by engaging in "price controls." Requiring brokerage firms to unbundle the research and execution costs of their services, he said, would be one form of price control. He added that he would "prefer that [any regulation of soft dollars] be done by the SEC and not by Congress."