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Note to Figure 1: This figure isolates that portion of the net
change in business capital associated with the sale 
(net of redemptions) of long-term securities in public, private
and international transactions.  Long-term securities include
common stock, preferred stock, and corporate bonds.  The absence
of any long-term upward trend is surprising, considering that
real GDP has approximately tripled over this period, and suggests
that financial markets are more important as trading venues or as
sources of short-term financing than as a direct source of
additional long-term capital.  The data also show that, for
equity securities, redemptions have substantially outweighed
issuances since the 1980's.
 
Note to Figure 2: This figure provides a year-by-year comparison
of the size of primary and secondary markets in equity
securities.  It shows the degree of activity in IPO s and
additional issues (primary market) and the activity in trading
markets (secondary market) from 1935 through 1995.  The dramatic
increase in turnover or trading volume seen in secondary markets
has not been matched by primary-market activity.  Today, to an
increasing degree, purchasers of equity securities rely on the
integrity of trading markets and Exchange-Act protections rather
than on Securities Act protections.

Note to Figure 3: This figure shows the relative importance of
public offerings and private placements of equity securities
since 1984.  The dollar value of public offerings by domestic
corporations has exceeded that of  privately placed equity by a
factor of two or three.   There is little evidence here that
private placements have supplanted (regulated) public offerings
for the purposes of issuing equity securities.  This indicates
that there has not been any significant shift in recent years in
the balance between the costs and benefits attendant to the
regulation of the capital formation process.

Note to Figure 4: This figure shows how likely seasoned issuers
are to engage in underwritten public offerings, and thus how
likely issuers are to benefit from the due-diligence associated
with such offers.  It reports the percentage of NYSE, Amex and
Nasdaq companies that made underwritten offerings of additional
common stock each year since 1985.  Approximately 4-6% of these
relatively large companies are subject to due-diligence
investigations each year.  Excluding S-3 filings, where due-
diligence efforts are less extensive, coverage falls to 2-3% per
year.  

Note to Figure 5: This figure provides a visual depiction of the
degree of uncertainty that is introduced into the public-offering
process by SEC staff review of registration statements.  It is a
histogram that shows the distribution of waiting periods (between
the initial filing of a registration and the date it is declared
effective by the SEC staff) following underwritten public
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offerings of additional common stock by NYSE, Amex and Nasdaq
issuers in the period 1990-94.  The statistical distributions of
waiting times for reviewed and unreviewed registrations clearly
differ in their average values, with review adding several weeks
to the typical waiting period.  Staff review also appears to
contribute to uncertainty, based on a comparison of the variances
or spread of the two statistical distributions.  

Note to Figure 6: This figure shows the approximate fraction of
underwritten offerings of additional common stock that would have
avoided mandatory prospectus delivery and SEC staff review if
company registration had been in place during the period January
1992 to December 1994 and if participation were universal.   For
example, if offerings amounting to less than 20% of prior
capitalization were not subject to mandatory prospectus delivery,
as recommended, then two-thirds of past offers by NYSE, Amex and
Nasdaq issuers would have qualified for exemption from mandatory
prospectus delivery.  Similarly, if offerings amounting to less
than 40% of prior capitalization were not subject to SEC staff
review, as recommended, then over 95% of past offerings would
have qualified for exemption from staff review.  These values
underestimate qualification rates to the extent that issuers act
to reduce the size of their offers to satisfy a threshold test.