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This file contains materials relating to the President's meeting with Ray Garrett.
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Securities and Exchange Commission
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1561559
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Securities and Exchange Commission
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This file contains materials relating to the President's meeting with Ray Garrett.
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Richard B. Cheney Files
Richard Cheney's General Subject Files
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Securities and Exchange Commission. (1934 - )
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The original documents are located in Box 10, folder "Securities and Exchange
Commission" of the Richard B. Cheney Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 10 of the Richard B. Cheney Files at the Gerald R. Ford Presidential Library
THE WHITE HOUSE
WASHINGTON
October 14, 1974
MEETING WITH RAY GARRETT, JR.
Monday, October 14, 1974
12:15 p.m. (15 minutes)
The Oval Office
From: Dean Burch
PURPOSE
To receive a brief rundown of the responsibilities and
principal concerns of the Securities and Exchange Com-
mission, from the Chairman of that Commission.
BACKGROUND, PARTICIPANTS & PRESS PLAN
A. Background: This is one of a series of meetings with
the chairmen of the independent regulatory commissions,
to acquaint you with the substance of their work --
and them with you.
B. Participants: Chairman Ray Garrett, Jr.
C. Press Plan: White House photographer. Meeting may
be announced.
TALKING POINTS (a Memorandum prepared by Chairman Garrett
is attached) (Tab A)
NOTE: Mr. Garrett was appointed to head the SEC in August
1973. He is a distinguished securities attorney
from Chicago. He followed Brad Cook who resigned
under pressure during the Mitchell-Stans trial.
One of Chairman Garrett's colleagues is Commis-
sioner Phil Loomis who was a classmate of yours
at the Yale Law School.
(1) At the Chairman's discretion, the White House senior
staff is always available for consultation: Don Rumsfeld
and Phil Buchen on matters of substance, Bill Walker with
regard to personnel.
continued
- 2 -
(2) We will be receptive to the Chairman's recommenda-
tions as to Commission appointments -- e.g., the possible
reappointment of Commissioner Pollack in June 1975 -- to
make sure that the necessary expertise is represented.
(3) Seek the Chairman's views on the prospects for
passage of H.R. 5050 (which may get through the House
in the post-Election session). This bill embodies the
revolutionary new requirement for "negotiated rates"
on sale of securities. Bitterly opposed by the secur-
ities industry.
MEMORANDUM
October 14, 1974
TO:
The Honorable Dean Burch,
Counsellor to the President
FROM: Ray Garrett, Jr., Chairman
Securities and Exchange Commission
RE:
Possible Topics for Discussion at Conference with
the President at 12:15 p.m., October 14, 1974
Pursuant to the request of your staff, I have set forth
three areas that the President may wish to discuss at our
conference.
Budget, Appointments, etc. The Securities and Exchange
Commission has no current problems in this area that need be
of concern to the President. The next Commissioner's term of
office to expire -- we have staggered five-year terms -- is
that of Irving M. Pollack, Democrat, on June 5, 1975. I am very
eager to see Mr. Pollack reappointed, but that does not require
immediate attention.
Legislation. After the election, and before Christmas,
we expect the Congress to approve comprehensive legislation
affecting the securities markets and the Securities and Exchange
Commission's authority and responsibility. This is the most
comprehensive piece of legislation relating to securities market
regulation since the creation of the Securities and Exchange
Commission in 1934. The Secretary of the Treasury and the
President's Congressional Liaison Staff, as well as the Securities
and Exchange Commission, successfully urged favorable action
by Congressman Staggers' Committee on Interstate and Foreign
Commerce on H.R. 5050, the House counterpart to several bills
already adopted by the Senate. Assuming no surprise in what
comes out of conference, we expect to recommend that the
President sign this legislation.
Other related legislation has been submitted, but we do
not expect any action on them by this Congress.
-2-
Securities Markets. It is well known that our markets
for stocks and bonds have been in a prolonged, declining trend.
The declining trend appears to be part of a world-wide phenomenon,
generally thought to be closely related to inflation. One
result has been great difficulty for the securities industry --
the broker-dealer and investment banking firms -- to raise capital
from the public for corporate expansion.
This subject was aired at the Pre-Summit Conference on
Banking and Finance. Last week we saw an upsurge in stock
prices and trading volume on the New York Stock Exchange, but
it is impossible to tell whether this indicates a long-range
favorable trend.
It is not so well recognized that the securities
industry has been suffering severely. Attached, for your
information, is a copy of one of our two submissions to the
Pre-Summit Conference on Banking and Finance.
Aside from certain tax proposals to strengthen securities
firms in the future, the foreseeable problem likely to concern
the President in the coming year is the relationship of
commercial banks and bank holding companies to the securities
industry. Some, though apparently not all, of the major bank
holding company systems are pressing for the legal right to
become more directly engaged in the securities business through
permissive rules which they seek to have adopted by the Board
of Governors of the Federal Reserve System or through relaxing
amendments to the Glass-Steagall Act.
The problem is not only what is good for banks. Direct
bank competiton could be so devastating to existing securities
firms that the problem is also whether we wish to preserve an
independent securities industry, meaning one not dominated by
banks and bank holding companies. Without such an independent
securities industry, the freedom of access of companies to the
public capital market might be curtailed.
Attachment
>and
EXCRANCE
CONMISSIONS
SECURITIES AND EXCHANGE COMMISSION
MCMXXXX
WASHINGTON. D.C. 20549
OFFICE OF
THE CHAIRMAN
STATEMENT OF CHAIRMAN RAY GARRETT, JR.
REGARDING CAPITAL MARKETS AND CAPITAL FORMATION"
Ensuring the availability of adequate long term capital over the next
decade is clearly one of the most necessary requirements for this country's
future economic growth. However, in addition to measures designed to make
capital available for investment and to make investment attractive, we
must be certain that the mechanism for raising equity and long-term debt
is not destroyed by the disappearance of a high capacity, diversified,
securities industry.
The securities industry is in an alarming downward trend. New York
Stock Exchange member firms, which account for approximately 75 percent
of the revenues of the industry, lost $66 million before tax in 1973 and
have reported a $49 million loss for this first half of 1974. The profit
problem is widespread: in eleven of the last twenty-four months, 50 per-
cent or more of the New York Stock Exchange firms have reported losses.
And between 1971 and 1973 the number of New York Stock Exchange carrying
public customer accounts declined 16 percent. Further, it does not appear
that the industry is simply suffering through the low point in this profit-
ability cycle, offsetting the high point in the late 1960's. Our preliminary
data indicate that the return on equity in the industry currently is well
below that experienced at the bottom of the previous cycle and about one-
tenth of the median rate of the past seven years.
An upward trend in prices and volume will benefit the securities industry,
but there are other adverse trends that need examination. I recommend that
interested government agencies conduct a coordinated review of the respective
role of, and government policies toward, our many different financial
institutions considering both existing statutes and future requirements with
respect to the process of capital formation for American industry. As one
example, securities industry has expressed deep concern that the aggressive
expansion of banks and bank holding companies into new services in recent
years while the securities industry has been declining, has created an
unequal competitor for the securities industry, both because of the size of
the banks and because they appear to be regulated by agencies whose primary
concern is the health of the banking system. If we are to preserve a healthy
securities industry independent of domination by commercial banks, protective
measures may be indicated.