Proxmire: insider trading `grossly unfair'
Congress is preparing to crack down on insider trading, greenmail, junk bonds, and lax antitrust enforcement, says Sen. William Proxmire (D) of Wisconsin, who will head the influential Senate Banking Committee next year. Mr. Proxmire, whose committee has oversight responsibility for the Securities and Exchange Commission, plans to hold hearings on insider trading and other issues associated with the takeover frenzy on Wall Street.
It is insider trading that raises the senator's ire most.
``It is grossly unfair,'' he said in a phone interview Wednesday. ``It distorts our market and leaves many investors feeling they're playing with loaded dice and that they're victimized. We can and should correct that.''
Proxmire says the SEC and the stock exchanges should provide fines for the corporations whose employees are engaged in insider trading. And a corporation should make sure employees know that if they engage in insider trading they are going to be fired and the corporation is going to testify against them.
``Peer pressure and supervisory pressure,'' the senator says, ``can very greatly reduce insider trading.''
Proxmire says he thinks the SEC probably did bargain as best it could in the Ivan Boesky case. ``The SEC did get the biggest fine in the history of mankind - who ever heard of a $100 million fine?'' Still, ``in view of the enormity of what he [Mr. Boesky] has done,'' the senator says, ``if he is guilty - and that is for a court to decide - there should be a prison term.''
Other key issues:
Greenmail: ``I think there's a good solid chance we can get legislation prohibiting greenmail,'' by which a corporation buys back the stock of a particularly threatening shareholder at a premium to get him to go away.
Junk bonds. ``I think what we might do to limit junk bonds is to provide that margin requirements apply to junk bonds, which they don't now.
``If you or I want to go out and buy stock,'' he says, ``we have to put up 50 percent of our own money. On the other hand, some big wheeler and dealer can go out to Drexel Burnham and can borrow 3 or 4 billion dollars, putting up none of his own money. It can be junk bonds - high-interest-rate, high-risk bonds. He can bid for the corporation and maybe take over. It's ridiculous.''
The senator also supports tougher antitrust action by the executive branch and says that corporate raids do little to increase industrial efficiency and competitiveness.
``The best way to overcome incompetent management,'' the senator says, ``is not with takeovers, which greatly increase the debt of corporations ... and result in inequity among investors because of insider information and so forth - but with effective, vigorous antitrust action.''
Proxmire says the ``administration, particularly the attorney general, has not been as vigorous in prosecuting antitrust cases as it should be.''
Congress, he points out, has an ``obligation to call the Justice Department before it.... We now, of course, have Democratic control and we have people on the [Senate] Judiciary Committee who are going to be very vigorous on this.''
Proxmire says he is not as concerned about the theoretical dangers of market concentration as he is about lack of competition. Tougher antitrust enforcement, he says, can enhance competition.