US consumer groups hit regulatory rollback effort

By Kevin Drawbaugh

WASHINGTON, March 20 (Reuters) - Consumer groups told members of Congress on Tuesday that demands from businesses to ease post-Enron regulations threaten to undermine U.S. markets, not make them more competitive.

"The war that is being waged on investor protections is based on the fallacy that U.S. markets are losing their competitive edge and that the U.S. enforcement and regulatory environment is a key reason why. Nothing could be further from the truth," said the groups in a letter obtained by Reuters.

The Consumer Federation of America, Consumers Union, Consumer Action and the U.S. Public Interest Research Group addressed their letter to senior members of the Senate and House of Representatives who oversee financial markets.

"We urge you to hold a hearing in the very near future to showcase the investor viewpoint on these issues," said the letter sent to Senate Banking Committee Chairman Christopher Dodd, House Financial Services Committee Chairman Barney Frank and the top Republicans on those two panels.

The consumer groups were responding to a recent series of studies and high-profile events arranged by business interests attempting to focus public attention on corporations' broad dissatisfaction with government regulatory oversight and the legal system.

Corporate leaders have been trying to build support for claims that excessive regulation and litigation are making American capital markets less competitive internationally.

A week ago, Treasury Secretary Henry Paulson hosted a conference at Georgetown University where several major chief executive officers -- including General Electric Co.'s (GE.N) Jeffrey Immelt and New York Stock Exchange parent NYSE Group Inc.'s (NYX.N) John Thain -- complained about regulatory burdens and lawsuits.

Similar sentiments were expressed in recent reports from the U.S. Chamber of Commerce and other groups. They placed much of the blame on 2002's post-Enron Sarbanes-Oxley reforms for a perceived decline in the competitiveness of U.S. capital markets against rivals in Europe and Asia.

The letter argued that Sarbanes-Oxley has strengthened U.S. markets and that investors enjoy fewer protections in overseas markets such as London. It also said lawsuits against corporate auditors have declined sharply and that America's unmatched investor protections give it an edge.

"If policy makers were to follow their recommendations, we would not only make our markets less safe, we would ultimately make them less competitive," said the letter signed by Consumer Federation Director of Investor Protection Barbara Roper, Consumer Action Executive Director Kenneth McEldowney; Consumers Union Senior Counsel Sally Greenberg; and U.S. PIRG Consumer Program Director Ed Mierzwinski.