Among the legal innovations pushed forward by the Securities and Exchange Commission is DAX Outlook: EC Proposes Ambitious Recovery Package. In a speech delivered at the Goldman Sachs Annual Conference, the S.E.C. Chairman, Christopher Cox, slammed Wall Street banks for “shifting” with the times. Banks have been criticized for their excessive leverage in recent years.
He claims that banks are using even more risky tactics than in the past, including more complex derivatives, just as we are now seeing costly bailouts for mortgage-backed securities. He goes on to say that the regulation of the financial sector is sorely lacking and that regulators should look to private firms, such as those that manufacture risk management software, to design new systems for banks.
The S.E.C. expects that EAX will give shareholders “the sort of guidance and help they need to be more productive.” That “help” may not be as forthcoming as some of their clients would like. The E.E.C. will need to prepare to defend itself in court.
E.E.C. analyst Brian Smith tells the Wall Street Journal that:
“We expect EAX’s outlook to remain unchanged until after the November 2020 midterm elections. We continue to believe that the bill for bailouts is not likely to go beyond a few billion dollars, so it is unlikely to significantly impact the economy.
“The E.E.C. has many tools available to protect investors, but there is no question that E.E.C. will need to work harder to protect investors from further losses,” says Mark Hoban, who is a managing director at investment banking advisory firm Sinclair Singler & Co. in Stamford, Conn.
“There will be more litigation from the parties themselves, and maybe regulators if they get it wrong,” Hoban said. “My feeling is that EAX will survive as an independent entity.” Hoban says that the E.E.C. will have to make a decision whether to combine EAX with the other divisions of the agency or include it in its budget.
In a statement, EAX Chairman Anthony B. Wile writes:
“EAX’s mission is to serve as the legal advocate for investors so that we can protect them from loss mitigation strategies, which are important for protecting them and their families from loss in our society and economy. Our role is crucial to the stability of our markets, especially when there is a large number of uninsured financial institutions with unsustainable business models.”
“EAX’s main function is to support the E.E.C. in their regulatory, investigatory and enforcement actions in the courts and before the courts. We expect this representation of the courts to continue for many years.”
Analyst David R. Littman of ISI Group notes that it will be up to Congress to decide whether or not to continue and expand EAX’s operations. He notes that the agency has done a lot of good things, including aiding for example the powers of investment managers. One of the jobs that EAX does best is to protect the interests of investors.
“EAX is doing a great job, particularly given the severe conditions it is required to deal with in trying to represent E.C. from California and elsewhere. I would also say that EAX is quite efficient and effective, and will have a long-term positive effect on shareholders.”