The Treasury Department's proposed ban on proprietary trading by banking institutions came under attack at a panel discussion on financial regulatory reform at the Council of Institutional Investors conference in Washington.
Mark Anson, managing partner and chief investment officer, Oak Hill Investment Management, said Monday he dislikes the proposal as well as one that would ban banking institutions from owning private equity investment firms.
“Proprietary trading provides liquidity to the market,” he said. “It will be very hard to define (proprietary) trading.”
In addition, at a time policymakers and investors are concerned about excess leverage, the proposal “says liability-based capital is good” in the form of bank lending, “but equity-based capital is bad” through private equity investments, Mr. Anson said.
Another panelist, William Hambrecht, chairman and CEO of W.R. Hambrecht & Co., said the proprietary trading proposal would help reduce leverage in banking, while defining the scope of the ban is something that can be worked on.
Pending financial reform legislation introduced by Senate Banking Committee Chairman Christopher Dodd, D-Conn., was strongly endorsed by Joseph Dear, CIO of the $209.3 billion California Public Employees' Retirement System, Sacramento, and chairman of the CII.
The bill's corporate governance provisions “are very good,” said Mr. Dear, who also was on the panel.
The provisions include shareholder access to corporate proxy materials to nominate directors, a requirement for a majority of shares cast to elect directors, and an annual shareholder advisory vote on executive compensation.
“On balance, this bill is a major step forward … it is an important piece of legislation that needs to be passed,” Mr. Dear said.
A false alarm Sunday afternoon forced an evacuation on the opening day of the conference, disrupting membership meetings.
The entire Omni Shoreham Hotel, where the conference was held, was emptied at about 3:30 p.m. EDT when fire alarms sounded. CII attendees and several hundred other hotel guests spilled outside into the warm, sunny afternoon.
Hotel staff later said the emergency was a false alarm, set off by someone pulling the fire alarm. The all-clear was given to hotel guests at about 4 p.m. EDT.
The evacuation suspended the CII international committee meeting, while the CII governance committee moved to a restaurant across the street, said Amy Borrus, CII deputy director.