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Raiders of Wall Street
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12954 |
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CURRENT ISSUES
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| Issue
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5 / 1987 |
3,496 Words |
| Author
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Donald Lambro
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The insider trading scandal that has rocked the nation's securities industry represents different things to different people. To those who believe that the banking and securities industries are awash in corruption and greed, it confirms their worst fears and suspicions. To those who have long sought an end to the Reagan era's deregulatory policies, it reveals the need to impose stricter government regulations on Wall Street transactions generally and the process of business takeovers in particular.
And indeed as the scandal has unfolded in recent years, each disclosure has fed the widening public perception that insider trading permeates Wall Street. The view is that greedy and unscrupulous profiteers are making millions on insider information arising from a takeover mania that forces good companies to the brink of bankruptcy and victimizes innocent stockholders, and that only sweeping new laws and stiffer regulations will clean up the industry.
"A cancer has been spreading in our industry," says investment banker Felix Rohatyn, "and how far it will go will become clear only as the Securities and Exchange Commission (SEC) and federal prosecutors pursue the various investigations currently under way. The cancer is called greed."
But an examination of the complicated issues underlying the nation's insider trading scandal reveal that public perceptions are not always accurate and that there is a lot of blame to go around. Most analysts, government officials, and outside experts believe that the securities industry has done an abysmal job of regulating itself, and that the securities regulations are too often imprecise and have not kept pace with the fast-moving and complex world of risk arbitrage, leveraged buyouts, "greenmail," "two-tier offers," and a wave of mergers and acquisitions.
"If you don't immediately set to putting your houses in order, it will be done for and to you," Congressman John Dingell (D-Michigan), chairman of the Energy and Commerce Committee, lectured a closed meeting of brokerage executives earlier this year. "I really don't think you want a federal cop on top of every one of your computer terminals."
No, they don't. But congressional oversight committees like Dingell's and the Senate Banking Committee, chaired by Sen. William Proxmire (D-Wisconsin), may be ready to give it to them. Dingell told the securities executives that they "can expect legislation in this Congress to shore up the self-regulatory system, increase penalties for failure to supervise, establish appropriate coordination through the system, and assure the SEC the independence and resources to do a better job of regulating and enforcing."
How far does the scandal go?
Before last November, when the news broke the celebrated case of Ivan Boesky - one of the industry's most notorious arbitrageurs who was forced to pay $100 million in fines and penalties in an SEC settlement of insider trading charges - the SEC's insider trading cases usually ended up on the business pages. Now they are on page one. This is all to the good, say SEC officials, because it acts as a deterrent to others. But it also feeds the perception that insider trading is running rampant on Wall Street. Actually, no one knows exactly how widespread insider trading is,
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