Committee On Capital Markets Report

The Committee on Capital Markets, a high powered committee attempting to provide political cover for needed changes in our regulation of the securities markets, has issued its 135 page report.  There are no surprises in the report.  The Committee recommends that we lighten Section 404 of Sarbanes Oxley and decrease the bite of litigation (public and private) against companies and their "gatekeepers" (auditors and directors).  To fend off charges that the Committee is for lax corporate governance the report also supports more shareholder rights (majority voting bylaws and votes on poison pills).  It takes no position, however, on the thorny questions of executive compensation and the new AIG case (shareholder nominations to the board).  The ultimate irony of the recommendations is the Committee's conclusion that the President should direct another committee -- the Working Group on Financial Markets (Paulson is on this committee; he sponsored the Committee on Capital Markets)-- to "examine" the recommendations and "propose" reforms.  So Secretary of the Treasury Paulson is, in essence, has his committee recommending that another committee of which he is a member be directed to study the recommendations and propose reforms.  Perhaps the Working Group will then recommend that the Secretary of the Treasury support and champion the reforms in Congress and the SEC.