In response to the massive loss of unionzed, relatively well-paid manufacturing jobs in the US, the barons of Wall Street (Bob Rubin, et al) generally respond with thinly veiled contempt for the knee-jerk whining of the protectionst volk. “Don’t you understand?” they say, “this it the global economy and there’s no reason for manufacturers to pay Americans to do the same thing the Chinese can do for 1/50th the price. Besides, what are you a racist? Don’t you believe that Mexicans and Indians and Chinese should have jobs?” I’m paraphrasing here, obviously, but this is pretty standard.
So there’s something deliciously ironic about listening to Wall Street bitch and moan about the fact that Wall Street is losing share of the international financial markets. So grave is the threat of New York losing its prime position, that in January Mayor Mike Bloomberg (along with Chuck Schumer) called a press conference to publicize a report issued by McKinsey consulting (which obviously has no conflict of interest in this sort of thing) that argues that in order to preserve Wall Street’s pre-eminence we must do away with — you guessed it — excess regulation, namely Sarbanes-Oxley.
Despite the carping from the Street, Sarbanes-Oxley, as Business Week recently pointed out has succeeded at doing precisely what it was designed to do, that is produce reliable corporate reports that investors can trust in making decisions about what stocks to buy and sell. But the law’s virtues aside, there’s no persuasive evidence that Sarbanes-Oxley has anything to do with the recent drop in Wall Street’s shares of global IPOs. As Thomas Palley argues, the more likely explanation is simply that “[f]oreign financial markets are catching up in quality of technology and regulatory governance.” Why should New York be the locus for international finance? Why not let a thousand flowers bloom?
The question is whether the Democratic congress is going to be suckered by Wall Street’s whining. So far, things don’t look so good. Chuck Schumer, who sits on the Senate finance committee was at that Bloomberg press conference and has been making noises about weakening Sarbanes-Oxley. So here’s a question for Chuck: If you change American regulatory policy with the stated intent of protecting a single American industry from foreign competition, doesn’t that make you a protectionist? Or are protectionists only those who try to protect labor and not capital?