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Senate Banking Committee Chairman Phil Gramm says he wants to overhaul the securities and corporate bankruptcy laws, an aggressive agenda that capitalizes on Republican control of the White House and Capitol Hill. Outlining his plans for the next two years, the Texas Republican said he also intends to slash registration fees, grant commercial banks new powers, and boost pay for Securities and Exchange Commission employees. Yet his re-examination of the 1933 and 1934 securities acts garnered the most attention during a packed address to lobbyists and reporters. “The markets have changed dramatically,” Gramm said. “We need to go back and look at our laws.” The Securities Industry Association praised Gramm’s initiative, saying Congress has yet to evaluate the laws in light of the Internet and the development of electronic communication networks. “Those are changing the ways investors participate in the marketplace,” SIA vice president Jim Spellman said. “You need to ensure the rules continue to promote new technologies.” Gramm’s plan looks much more comprehensive than internal efforts by the SEC to modernize how securities are registered and traded. The SEC in the late 1990s advocated a massive initiative known as the “aircraft carrier,” in reference to the scale of the effort. When that failed, it started attacking modernization rule by rule. Under consideration this year are easing restrictions on switching between private and public offerings and repealing limits on what companies may say during registration periods. The banking committee chairman was short on specifics, saying nothing the SEC does in the securities markets will be immune from review. “I’m talking about everything,” Gramm said. “We are talking about the whole structure of the laws. That review is long overdue.” New technologies make the securities markets far more transparent now than during the Great Depression, he said. Information about companies and stock trading is available on the Web to all consumers for free, he added, heightening the need to revisit securities regulation. That means many of the reporting and disclosure requirements that form the heart of the securities laws may have outlived their usefulness, Gramm said. Gramm also noted that all the SEC’s rules and processes need to be weighed against the cost imposed on issuers and traders. When the costs outweigh the benefits, the rule will be eliminated, he said. Securities law reform will begin shortly with a series of roundtables between Senate Banking Committee members and securities industry leaders, a committee official said. From those meetings, Gramm’s staff will draft legislation. That bill will form the basis for hearings, the official said. Gramm declined to specify when he hoped to complete his reform effort. “We are going to do a comprehensive review with hearings,” he said. “It won’t be quick.” For corporate bankruptcies, Gramm said he planned to address business bankruptcy issues at the same time his committee works on consumer bankruptcy reform. The consumer side of the bill would require debtors with high incomes to repay some of their bills. Gramm declined to provide specifics, saying the committee will hold hearings in the coming months to determine what corporate provisions to tackle. The bill is expected to address whether creditors should be allowed to submit their own reorganization plans if a corporate debtor fails to propose a plan within 18 months of filing. Also expected to be addressed is a measure giving retailers only 120 days to decide whether to shed a lease in bankruptcy. Both items were included in a bankruptcy bill that President Clinton vetoed last year. Gramm predicted that President Bush will be more receptive to reform. “We will write and the president will sign a new bankruptcy bill,” Gramm said. “It will be a better bill than [the one] President Clinton vetoed.” Gramm decried the high price companies pay to register securities, including initial public offerings. “Taxing the issuance of new stock has to be the most inefficient tax imaginable,” he said. The chairman said he may go even further than legislation introduced last year to cut these fees in half. “They are about six times the level needed to run the SEC, so that is the level to look at,” Gramm said. Another option is to eliminate registration fees completely, he said. Gramm said he also wants to merge the bank and thrift charters so the Federal Deposit Insurance Corp. can operate a single fund to cover all deposits. Such efforts have failed in the past because thrifts enjoy greater powers than do banks, including the ability to own commercial companies. A solution could be to grant banks the same powers as thrifts, Gramm said. “We could charter up for banks,” he said, adding that he expected serious opposition from lawmakers opposed to the mixing of banking and commerce. “That is going to be controversial as hell.” The idea drew criticism from America’s Community Bankers, the trade group for thrifts, which said lawmakers should merge insurance funds without eliminating the thrift charter. “We are for more choices, not less,” ACB spokesman Robert Schermund said. Gramm also promised to free the SEC to pay its lawyers and examiners more money. The agency has consistently lost staff to the private sector, but unlike the Federal Reserve and banking agencies, it has been barred by law from raising salaries to keep employees. Copyright (c)2001 TDD, LLC. All rights reserved.

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