The Times article “Drexel Sought Help From 9 in Congress to Pressure SEC” (Feb. 1, Part I) completely missed the point. The letter that was sent to Chairman David Ruder expressing “alarm” with the SEC’s demand that Drexel Burnham Lambert move its Beverly Hills operation to New York City has nothing to do with political action committee contributions. It has to do with the economic future of California.
As the letter to Ruder points out, Drexel, which employs about 1,000 individuals in California, has raised over $12.5 billion for California non-investment grade companies between 1980 and 1987. The importance of high-yield bonds can be illustrated by that fact that between 1977 and 1987, 391 California corporations issued such bonds to raise $37 billion in growth capital. An additional 152 corporations with ties to California raised $31 billion in capital through high-yield bonds during the same period. These companies have provided more than 300,000 jobs to the state.
Drexel has been a key player in the economic growth and prosperity of California. Moving its operations to New York would deprive the region of billions of dollars in growth capital, while seriously impairing the Los Angeles area as a major center of finance. Particularly hard hit will be small businesses, which would find it much more expensive to raise capital in other regions of the country. Having a major investment banking firm like Drexel makes access to capital more affordable to California-based firms, particularly those exporting to the Asian market.
Another important point that the article failed to mention is the outrageous nature of the SEC’s demand. The agency apparently believes that it cannot properly supervise Drexel’s high-yield bond operation if it remains in California. That kind of thinking is tantamount to moving all of the nation’s bank operations to Washington so that the comptroller of the currency can better regulate them.
REP. DAVID DREIER