Dear Fellow Americans,
The 20th Century was the American century in no small part because of our
economic dominance in the financial services industry, which has always been
centered in New York.
Today, Wall Street is booming, and our nation’s short-term economic outlook is
strong. But to maintain our success over the long run, we must address a real
and growing concern: in today’s ultra-competitive global marketplace, more and
more nations are challenging our position as the world’s financial capital.
Traditionally, London
was our chief competitor in the financial services industry. But as
technology has virtually eliminated barriers to the flow of capital, it now
freely flows to the most efficient markets, in all corners of the globe. Today,
in addition to London, we’re increasingly competing
with cities like Dubai, Hong Kong, and Tokyo.
The good news is that we’re still in the lead. Our financial
markets generate more revenue than any other nation, and we continue to be home
to the world’s leading companies, which help form the backbone of our national
economy. In fact, for every 100 Americans, five work in financial services –
and these jobs are not just in New York and Chicago. In states as
diverse as Connecticut, Delaware,
South Dakota and North Carolina, the financial services
industry employs major portions of the workforce.
All Americans have a vested interest in strengthening America’s financial
services industry, and the time has come to rally support for this effort. To
stay ahead of our hard-charging and dynamic international competitors, and to
ensure our nation’s long-term economic strength, we can no longer take our
preeminence in the financial services industry for granted. In fact, the report
contains a chilling fact that if we do nothing, within ten years while we will
remain a leading regional financial center; we will no longer be the financial
capital of the world. We must take a cold, hard look at the industry,
identifying our weaknesses, learning from the best practices
of other nations, and drawing upon strategies that will allow us to adapt to
the changing realities of the market. That is exactly why we commissioned this
report.
The report provides detailed analyses of market conditions
here and abroad, informed by interviews with more than 50 respected leaders
drawn from the financial services industry, consumer groups, and other
stakeholders. The findings are quite clear: First, our regulatory framework is
a thicket of complicated rules, rather than a streamlined set of commonly understood
principles, as is the case in the United Kingdom and elsewhere. The
flawed implementation of the 2002 Sarbanes-Oxley Act (SOX), which produced far
heavier costs than expected, has only aggravated the situation, as has the
continued requirement that foreign companies conform to U.S. accounting
standards rather than the widely accepted – many would say superior –
international standards. The time has come not only to re-examine
implementation of SOX, but also to undertake
broader reforms, using a principles based approach to eliminate duplication and
inefficiencies in our regulatory system. And we must do both while ensuring
that we maintain our strong protections for investors and consumers.
Second, the legal environments in other nations, including Great Britain,
far more effectively discourage frivolous litigation. While nobody should
attempt to discourage suits with merit, the prevalence of meritless securities
lawsuits and settlements in the U.S.
has driven up the apparent and actual cost of business – and driven away potential
investors. In addition, the highly complex and fragmented nature of our legal
system has led to a perception that penalties are arbitrary and unfair, a
reputation that may be overblown, but nonetheless diminishes our attractiveness
to international companies. To address this, we must consider legal reforms that
will reduce spurious and meritless litigation and eliminate the perception of
arbitrary justice, without eliminating meritorious actions.
