Two short bits about the pre-fight fight over the Supreme Court security litigation case. First, Treasury Secretary Paulson is the one who directly asked the Justice Department not to support the SEC position, according to the Washington Post -- Paulson Behind Opposition to Third-Party Suits. This is consistent with the Bush Administration's policy on lawsuits.
The second piece is more interesting. The public justification -- or at least how the press is reporting it -- is that the case could undermine the competitiveness of the US financial markets. Example if this is the following from the Economist's story Securities lawsuits: The Stoneridge showdown:
The Treasury is at odds with the SEC, too, fearing that a ruling in favour of investors would further damage American competitiveness. Many foreign firms that choose to list their shares elsewhere point to America's “litigation lottery” as the principal reason. Although filings of securities class actions have been falling since 2005, the overall value of settlements has continued to rise.
Yet, the case itself may have little bearing on whether companies' list in the US or not. As the same Economist story points out:
If suppliers and advisers can be dragged into class actions, it would no longer even be necessary to issue shares in the United States to incur securities liability, points out Peter Wallison of the American Enterprise Institute, a think-tank. Any firm, anywhere, doing business with American companies would have to live with the risk that the transaction could later be portrayed as fraudulent or deceptive.
Let me repeat -- "any firm, anywhere." "It would not even be necessary to issue shares in the United States." In other word, the case has no impact on whether companies are listed in the US.
Can we come clean on this then? The case may be bad for American companies - therefore US competitiveness in general, some might claim. But the justification that it will make the US financial markets less competitiveness seems to less than correct.
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