DETROIT ? Structural changes in the U.S. markets and increased globalization of financial markets kept the United States from entering another Depression after the Dot-Com Bubble burst, William Donaldson, Chairman of the U.S. Securities and Exchange Commission, told the Detroit Economic Club.

Donaldson, speaking on the 75th anniversary of Black Friday, when the Stock Market crashed, creating the Great Depression, said there were a number of parallels between the new era of prosperity that President Calvin Coolidge proclaimed before the Great Depression and the New Economy of the late 1990s.

He said companies with no real connection to new industries, such as aviation, saw their share prices skyrocket thanks to naming accidents. Truly groundbreaking companies, such as the Radio Corporation of America, better known as RCA, watched their share prices increase by more than 600 percent in one year.

Companies that had no business being publicly traded took advantage of the availability of insufficiently-skeptical capital in the public markets in the late 1920s, just like Dot Comers did in the 1990s. Those companies eventually contributed to nearly 90 percent plunge in share prices from their peaks at the depth of the Great Depression. As for today?s companies, ?Way too many companies went public that should not have gone public during the boom,? Donaldson said. ?Many should go private.?

Even given the SEC?s recent history with high-profile technology company failures and malfeasance, including Enron, WorldCom and Adelphia, Donaldson clarified after his speech that he does not want to be seen as pointing the finger at technology companies or the tech industry as a whole.

?There were a lot of low-tech companies, especially in the services industry, that shouldn?t have gone public either,? he said.

Donaldson said that the main reasons the United States did not slip into Depression after the dot-com bubble burst was greater integration within the world economy and the associated gains in competitiveness and liquidity; increased access to information for investors, regulators and businesses and increased availability of complex financial instruments such as derivatives and hedge funds.

Donaldson also discussed the current state of regulatory oversight of public companies and capital markets. In the face of skeptical questions from the Economic Club audience regarding the Sarbanes-Oxley financial reporting and disclosure requirements, Donaldson vigorously defended the law and the SEC?s rule-making and enforcement of the requirements, saying that in the long term the benefits will outweigh the risks.

?It?s a cost-benefit analysis, the costs are up front and the benefits are down the line. The benefit will come when the believability of financial statements produced is increased,? he said. ?Investments will sell at higher multiples.? Donaldson did say that he expects the SEC to revisit some Sarbanes-Oxley provisions as they apply to smaller companies where the compliance costs are proportionally higher.?

This story was written by Special Writer John Mozena. If you have story ideas for Mozena, you can reach him at [email protected].