Thursday, December 28, 2006

Predictions for 2007

It's pretty much a slow news week(s) when it comes to international finance. So I thought I'd give you some predictions for the year. I'm not very good at making predictions. As Yogi Berra once said, it's tough to make predictions, especially about the future. But here are a few:

  1. Hilary Clinton will get the Democratic nomination. This will actually happen in 2008, but I'm just putting it in here anyway. She'll win the election, too, unless the Republicans actually come up with a decent candidate -- and they won't.

  2. Incoming House Finance Committee chairman Barney Frank will hold hearings on CEO pay. Several academic types will testify that high CEO pay results from a combination of a "Lake Woebegon effect" (everyone wants an above-average CEO and tries to pay above-average to get one), plus poor corporate governance standards that make even independent board members unresponsive to the concerns of shareholders. All of this will be ignored and Congress will instead focus on some kind of CEO windfall tax.

  3. Very very few foreign companies will deregister from the U.S. market. Those that do will tend to be small, and will see a drop in stock price of about 10-20 percent the 120 days leading up to and following the deregistration announcement. Most of these companies will be European.

  4. NASDAQ and the London Stock Exchange will agree to a merger sometime around February. The UK Financial Services Authority will press for an agreement with the SEC similar to that signed to by the SEC and the European college of regulators regarding the NYSE-Euronext merger. The FSA won't get it -- the Americans will argue that the Balls Clause already gives the UK all the comfort it needs.

  5. The SEC will begin to seriously consider a mutual recognition scheme to allow non-US investment banks and stock exchanges to operate in the United States under their home market laws, without registering with the SEC under the Exchange Act. However, there will be strings attached. Lots of strings.

  6. Senator John E. Sununu will reintroduce the Optional Federal Chartering bill to create a National Insurance Office that would permit American insurance companies to choose to be regulated at the national level rather than at the individual state level. It won't go anywhere, mostly because of opposition from New York politicians.

  7. Despite a lot of pressure from Europe and complaints to the Treasury Department, the Federal Reserve will not waver from its plans to implement only a watered-down version of Basel II in the United States. This will effectively undermine the banking accord and force the world's banking regulators back to the drawing table for some quick fixes.

  8. At least one, and maybe two, SEC commissioners will leave this year for the private sector.

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