Treasury Market Termed Healthy
WASHINGTON - David Mullins, vice chairman of the Federal Reserve Board, said Salomon Brothers Inc.'s rule violations have not undermined confidence in the market for U.S. Treasury securities.
"The smooth functioning of this market in recent months demonstrates that there appears to have been no economically meaningful loss of confidence in this market as yet," Mr. Mullins said in testimony before a subcommittee of the House Energy and Commerce Committee.
The panel is investigating the Salomon Inc. unit's admitted violations of Treasury auction rules on five occasions.
Testimony of Corrigan
Also testifying on Wednesday was E. Gerald Corrigan, president of the Federal Reserve Bank of New York, who said that "one cannot help but be impressed with the sweeping management changes that have already been made" at Salomon.
He also cited "the strength of the new management's commitment to proper behavior and strengthened management and control systems."
Omaha investor Warren Buffett has taken charge of Salomon Brothers as an interim officer to protect his investment in the company.
Mr. Corrigan added that while official investigations are in progress, "it seems premature to come forward with any broad-based plans for regulatory changes of legislative proposals with respect to the government securities market."
Mr. Corrigan reiterated a call by the Treasury Department, Federal Reserve Board, and Securities and Exchange Commission to analyze the government securities market jointly and make recommendations for improvements within 90 days.
"With a carefully though-out and implemented approach, we believe it will be feasible to maintain the integrity and efficiency of this vital market," Mr. Corrigan said.
Treasury Assistant Secretary Jerome Powell told the subcommittee there is no evidence that other Wall Street firms engaged in practices similar to those confessed by Salomon executives.