DON'T KILL THE GOLDEN GOOSE

WALL STREET HAS ALWAYS been fair game for cartoonists and Congress. The Ivan Boesky insider trading scandal is encouraging them to lift their guns again.

It is entirely proper, as Sen. John Heinz, the Pennsylvania Republican, outlined on this page yesterday, that Congress probe thoroughly every aspect of the Boesky affair. But it should do so carefully, aware that there are costs involved as well as benefits to be gained.Already Sen. William Proxmire, the Wisconsin Democrat and new chairman of the Senate Banking Committee, has thrown his support behind legislation that would: 1) require a two-thirds vote of shareholders to approve a tender offer if outside directors oppose it; and 2) create a 60-day cooling off period between a hostile tender offer and the shareholders vote on the bid.

David Hale of Kemper Financial Services, Inc., Chicago, points out that such anti-takeover legislation is potentially bullish for bond yields because it would reduce the growth of corporate debt used to finance takeovers. But the effect could be to push rates unduly high and undermine the dollar if such laws reduce the amount of foreign capital flowing into the United States to finance equity purchases and takeovers.

So far, the United States has been financing its huge current account deficit largely through debt sales, either of bonds or money market instruments. But there has been a growing interest by foreigners in purchases of stock as well as efforts by foreign concerns to establish a U.S. presence to cope with dollar devaluation and protectionism by buying corporations outright.

The flow of foreign capital to the United States, Mr. Hale says, has been impelled as much by the worldwide movement toward financial deregulation as by differing national economic policies. In his words: "If today's scandals result in legislation that curtails asset turnover, debt securitization and capital mobility, it is more likely to increase domestic interest rates than depress them." It is also likely to further depress the dollar.

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