By Carrie Johnson
Washington Post Staff Writer
Friday, December 8, 2006
Sen. Christopher J. Dodd asserted yesterday that he was not "allergic to business," but the Connecticut Democrat vowed that preserving investor confidence would guide his actions and agenda as chairman of the Senate Banking Committee next year.
Dodd, whose state is home to many of the nation's 9,000-odd hedge funds, rejected the idea of legislation that would impose new rules on the $1 trillion industry. In a briefing with reporters yesterday, Dodd forcefully reasserted his jurisdiction over hedge funds -- trumping a bid by the outgoing chairman of the Senate Judiciary Committee to introduce legislation that would force the funds to register with securities regulators under certain circumstances.
Instead, Dodd said, he would question officials from the Treasury Department and the Federal Reserve Board about their efforts to better understand hedge funds, which are loosely regulated pools of capital designed for wealthy and sophisticated investors. Increasingly, public employee pension funds and other retail investors have been pouring money into hedge funds, an issue of concern for Dodd.
"We bear a responsibility to that kind of investor to make sure there's transparency and the like," he said.
Dodd's remarks are being closely watched by industry and investor advocates because they come at a time when trade groups are arguing that burdensome regulation and too many lawsuits are hurting the competitiveness of U.S. markets and sending businesses abroad.
While Dodd agreed with changing a contentious audit rule blasted by companies as overly expensive, he rejected a wholesale rollback of measures designed to protect investors after the collapses of Enron and WorldCom. In some instances, Dodd argued, regulators went far beyond the intentions of the 2002 Sarbanes-Oxley law. The Securities and Exchange Commission and the Public Company Accounting Oversight Board are to unveil changes to the audit rule within two weeks.
"I'm not going to tolerate during my stewardship here to have a systemic failure because we raced to the bottom in regulations," Dodd added.
The lawmaker said he would seriously consider proposals by the private Committee on Capital Markets Regulation, which last week called for less costly corporate rules and limits on the ability of people to sue businesses, board members and auditors.
Dodd also said he had not yet determined whether to pursue the presidency in 2008, a decision he said he would make early next year. Until then, Dodd said, he will not impose a blanket ban on accepting political donations from industries his banking committee oversees.
Separately, Sen. Arlen Specter (R-Pa.) introduced as expected a measure that would bar prosecutors from forcing companies to waive the attorney-client privilege and from refusing to pay attorney fees for employees ensnared in investigations.
Specter said he went forward with the legislation, which he will take up again next year, because Justice Department officials have failed to produce their own plan after repeated urging from Congress and a coalition that includes the U.S. Chamber of Commerce, the National Association of Manufacturers, the American Civil Liberties Union and the National Association of Criminal Defense Lawyers.