America Competes Act--Continued

Floor Speech

AMERICA COMPETES ACT--Continued -- (Senate - April 25, 2007)

BREAK IN TRANSCRIPT

Mr. CRAPO. Mr. President, I rise today in support of this global competitiveness amendment with the senior Senator from New York to S. 761 and to call attention to the challenges facing U.S. financial markets. I really appreciate the leadership role the senior Senator from New York has taken in the global capital markets competitiveness debate and I really appreciate our working relationship.

The first part of the amendment highlights findings that U.S. capital markets are losing their competitive edge in the face of intensifying global competition in initial public offerings, IPOs, over-the-counter, OTC, derivatives, securitization, and traditional lending. The second half of the amendment expresses the sense of the Senate about what steps should be taken to bolster the competitiveness of this essential sector of the U.S. economy.

According to the Schumer/Bloomberg report entitled Sustaining New York's and the U.S.' Global Financial Services Leadership, ``In looking at several of the critical contested investment banking and sales and trading markets--initial public offering, over-the-counter derivatives, and debt--it is clear that the declining position of the U.S. goes beyond this natural market evolution to more controllable, intrinsic issues of U.S. competitiveness. As market effectiveness, liquidity and safety become more prevalent in the world's financial markets, the competitive arena for financial services is shifting toward a new set of factors--like availability of skilled people and a balanced and effective legal and regulatory environment--where the U.S. is moving in the wrong direction.''

This is a very alarming trend because IPOs and OTC derivatives contribute to a robust and dynamic capital market which is a tremendously beneficial force for our economy and an empowerment to our citizens. It is critical to ensuring economic growth, job creation, low costs of capital, innovation, entrepreneurship, and a strong tax base in key areas of the country. The U.S. financial sector acts as a catalyst for all other sectors in the U.S. economy. That is why the decline in global initial public offerings in the United States, and the fact that London already enjoys clear leadership in the fast growing OTC derivatives market, are such worrying trends.

The report further states, ``The IPO market also offers the most dramatic illustration of the change in capital raising needs around the world, and the U.S. exchanges are rapidly losing ground to foreign rivals. When looking at all IPOs that took place globally in 2006, the share of IPO volume attracted by U.S. exchanges is barely one-third of that captured in 2001. By contrast, the global share of IPO volume captured by European exchanges has expanded by more than 30 percent over the same period, while non-Japan Asian markets have doubled their equivalent market share since 2001. When one considers mega IPOs--those over $1 billion--U.S. exchanges attracted 57 percent of such transactions in 2001, compared with just 16 percent during the first ten months of 2006.''

It further notes: ``London already enjoys clear leadership in the fast-growing and innovative over-the-counter derivatives market. This is significant because of the trading flow that surrounds derivatives markets and because of the innovation these markets drive, both of which are key competitive factors for financial centers. Dealers and investors increasing use derivatives and cash markets as interchangeable and are therefore combining trading operations for both products. Indeed, the derivatives market can be more liquid than the underlying cash markets. Therefore, as London takes the global lead in derivatives, America's competitiveness in both cash and derivatives flow trading is at risk, as its position as a center for financial innovation.''

One of the common themes we are seeing in terms of movement of business away from the United States to London and other capital markets are the regulatory burdens and the regulatory regime that we impose here in the United States. I do not think anybody would say that we should simply take down our regulatory position, because we do have one of the strongest markets in the world. But the question is are we over-regulating.

Fortunately, academics, business leaders, and politicians are working together to study this issue. They have identified several specific problems that hinder the competitiveness of the U.S. capital markets and have issued reports outlining possible solutions:

Interim Report of the Committee on Capital Markets Regulation, November 2006; Schumer/Bloomberg report entitled: ``Sustaining New York's and U.S.' Global Financial Services Leadership, January 2007; Commission on the Regulations of U.S. Capital Markets in the 21st Century, March 2007.

I would especially like to commend the senior Senator from New York for his efforts in this project. All three reports add considerably to the understanding of the challenges that American capital markets face and offer solutions that could help American markets, companies, and workers to better compete.

Additionally, on March 13, 2007, the Department of the Treasury convened a conference on United States capital markets competitiveness where conference delegates discussed ways to keep U.S. capital markets the strongest and most innovative in the world. This problem is well-documented and it is time that we take the necessary steps to restore America's leadership position in the global financial services marketplace.

This amendment states it is the sense of the Senate (1) Congress, the President, regulators, industry leaders, and other stakeholders should take the necessary steps to reclaim the preeminent position of the United States in the global financial services marketplace;

(2) the Federal and State financial regulatory agencies should, to the maximum extent possible, coordinate activities on significant policy matters, so as not to impose regulations that may have adverse unintended consequences on innovativeness with respect to financial products, instruments, and services, or that impose regulatory costs that are disproportionate to their benefits, and, at the same time, ensure that the regulatory framework overseeing the United States capital markets continues to promote and protect the interests of investors in those markets;

(3) given the complexity of the financial services marketplace today, Congress should exercise vigorous oversight over Federal regulatory and statutory requirements affecting the financial services industry and consumers, with the goal of eliminating excessive regulation and problematic implementation of existing laws and regulations, while ensuring that necessary investor protections are not compromised.

This amendment is supported by the American Bankers Association, the Business Roundtable, United States Chamber of Commerce, Financial Services Forum, Investment Company Institute, International Swaps and Derivatives Association, Securities Industry and Financial Markets Association, NASDAQ, and NYSE.

I also thank my colleagues for joining me in supporting this amendment, and I thank the senior Senator from New York for working with me on this amendment.

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