Proxmire Blasts Market Task Force, Will Push Bill to Streamline System

Senate Banking Committee Chairman William Proxmire (D-Wis.) vowed Tuesday to press a bill that would streamline regulation of U.S. stock, futures and options markets, despite opposition from the Reagan Administration.

Proxmire lashed out at an interagency working group set up by President Reagan to coordinate the Administration’s response to the global crash in October.

“The progress you have made is pitiful,” Proxmire told the task force at a hearing on the report they presented to Reagan on May 16. The four members are Treasury Under Secretary George Gould, Federal Reserve Board Chairman Alan Greenspan, Securities and Exchange Commission Chairman David S. Ruder and Wendy Gramm, chairman of the Commodity Futures Trading Commission.

“It appears that the independent regulators before us today, with the exception of SEC Chairman Ruder, have let themselves be drawn into the web of presidential politics by the Administration,” he said.

“The inactivity of the working group has cost us precious time. But that delay is now over. It is time to return to meaningful reform of our stock market system in the time we have left this year.”

Proxmire later told reporters he favored giving either the SEC or the Fed authority to make final decisions on key intermarket matters, such as harmonizing margin requirements and coordinated trading halts across markets.

He also said it “stands to reason” that relatively low futures margins were contributing to excessive volatility and speculation.

Ruder, alone among members of the panel, has called for temporarily boosting initial stock index futures margin levels to 20% to 25%, from about 15%. He also favors transferring authority over stock index futures to the SEC from CFTC, which regulates them.

Ruder expressed fears that failure to enact market reforms could trigger another crash. “I think that’s a specter that hangs over the system,” he said.

Greenspan said he did not believe that increasing margin requirements would reduce volatility, which he called an unfortunate permanent market feature.

Gould, who headed the task force, said Congress should not attempt to legislate against market declines nor eliminate volatility through increased regulation.

“Price controls and capital controls have never worked effectively in this country, and no amount of government control can sway markets if underlying economic fundamentals--or investor perceptions of those same fundamentals--take the market one direction or another,” he said.

The ranking Republican on the banking panel, Jake Garn of Utah, joined Proxmire in criticizing the group. He said its failure to come up with legislative proposals guaranteed that Congress “will probably do much more than you wanted.”

But disagreement in Washington and on Wall Street about what caused the crash make prospects for legislation uncertain. Congress is due to adjourn in mid-October.

In addition, Proxmire said he expected Reagan, a free-market advocate, to veto any reform measures.