Duncan Niederauer, CEO of NYSE Euronext, is on the Closing Bell with Maria Bartiromotoday and Financial Reformis on his mind. Since the bill passed, there have been serious debates as to whether it will actually benefit the American people and help bring the economy back on its feet.
The Pros: Niederauer says the legislation had to address the core areas that failed in the crisis. The legislation provides stronger systemic risk oversight and will bring much-needed transparency, bringing reporting and central clearing to the derivatives market.
The Cons: However, despite all this, Niederauer says since the bill requires hundreds of regulatory rule-makings and studies, there are a lot of unknowns as to how the legislation will be implemented and enforced. The lack of clarity leaves a lot of room for interpretation by regulators. [We] will closely monitor how the regulatory agencies interpret the legislation and weigh in when it is appropriate to hopefully ensure that the business community is not overly burdened.
Overall, Niederauer thinks that the regulatory reform bill is good for the financial system. The signing of this bill by President Obama was a historic and an important moment for US markets and the economy. While it probably goes too far in some areas and not far enough in others, the overall result is a stronger US financial system.
Not Willing To Take Risks
Since there is so much uncertainty, Niederauer believes investors will be waiting until they get some direction before making any moves. Right now he says, “M&A activity is not as robust and a lot of companies are going out on a risk.” The way he sees it, companies need to get more clarity from the administration and have more room to grow and innovate before we see more deal flow.
The Administration vs. Wall Street
Niederauer says the Administration’s financial stimulus measures seem to be having an impact, while experts disagree on how significant that impact may be. In the end, it is better than doing nothing. Niederauer would hope that any further efforts are directed toward small business lending programs, like the $30B package that President Obama proposed later this year.
Creating More Jobs
Niederauer says task number one is to focus on job creation, saying we must encourage and facilitate innovation and entrepreneurship. Small business and new enterprises are key to economic growth and new job creation. Niederauer says we should look at the key areas that facilitate a healthy investment climate in the US so that companies feel good about investing in new factories and plants, new equipment, and ultimately, more human capital or jobs. Niederauer also says there is high frequency trading and innovation in the markets along with some great lessons learned and measures taken from the May 6th 'flash crash'.
Niederauer says the rest of the world is also focused on recovery and new paths for growth, some are even ahead of the US in these regards. Niederauer explains, “Capitalists are unpatriotic. They’re going where the opportunities are. Right now, they are in some other places [rather than the US].” Countries such as China, Brazil, and certain parts of Europe have better economic environments than the US.
Crystal Lau contributed to this article.
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