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After American Capital Market Hegemony? August 3, 2006

Posted by federalist in Finance, Government Regulation.
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I never thought I’d see the day that the United States would lose its hegemony in the world capital markets.  Alan Murray, in his essay yesterday, “Fees May Be Costing Wall Street Its Edge In Global IPO Market,” notes that Wall Street investment banks are roughly twice as expensive as their foreign competitors.  “Does anyone really believe they deserve 7% of the capital raised by a newly listed company?”  Of course, it may not be long before America produces a crop of discount IBanks.

But later Murray points to more systemic faults in our capital markets, and these realy could cost us our capital superiority:

New Treasury Secretary Henry “Hank” Paulson Jr. — former chief executive of Goldman Sachs — … said there’s no simple answer to America’s IPO problem. “Markets overseas are much stronger, more competitive than they were a few years ago,” he said, “so that’s one of the reasons.”

He also cited the U.S. “legal environment” (read: trial lawyers), the “enforcement environment” (read: New York Attorney General Eliot Spitzer) and the “regulatory environment” (read: Sarbanes-Oxley) as contributing to a reluctance to raise new capital in the U.S.

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