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- BUSINESS, Page 45Business NotesSCANDALSWe'll All Hang Together
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- Just as the financial community had feared, the scandal set
- off by Salomon Brothers' efforts to corner the market for U.S.
- Treasury securities spread across much of Wall Street last
- week. On Capitol Hill, Richard Breeden, chairman of the
- Securities and Exchange Commission, said that "a distressingly
- large" number of firms had routinely inflated orders for bonds
- sold by government-sponsored agencies like the Federal National
- Mortgage Association. The bogus orders apparently enabled firms
- to purchase extra bonds and resell them at a hefty profit.
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- In response, Fannie Mae last week launched a program to
- audit bond sales and expel cheaters from the group of 56 firms
- that sell the securities to the public. "We realized there was
- no integrity in the system," an agency spokesman said.
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- Regulators also decreed that buyers of Treasury securities
- must verify their purchases to prevent Wall Street dealers from
- misrepresenting the bids and cornering the market. Although such
- steps were long overdue, they heightened financial firms' fears
- of draconian new regulations that could hobble the legitimate
- trading activities that generate much of Wall Street's profit.
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