Remarks to the US-CEE Connection: Transatlantic Challenges in Law, Business & Policy

Thank you, Łukasz [Chyla], for that kind introduction. I appreciate the opportunity to take part in the 4^th US-CEE Connection Weekend, especially during the year that the United States celebrates the 250^th anniversary of its Declaration of Independence.[1] Of course, standing here in the main aula of Jagiellonian University, which was founded in 1364, makes one realize that American institutions remain relatively youthful as compared to their European counterparts.

Many of you in this room are aware that Polish-born individuals played key roles in making the American revolution possible. Among those who helped America secure our independence were Thaddeus Kościuszko and Casimir Pulaski.

Kościuszko, a military engineer, arrived in America in 1776 to offer his services to the Continental Army. Commissioned as an officer, he helped design the fortifications at Saratoga and West Point, which played an important role in turning the tide towards American victory.[2] Today, he is buried not far away from here in Kraków at Wawel Cathedral and honored in the United States with a national memorial in Philadelphia.

Pulaski, a Polish nobleman, was recruited to the revolutionary cause by Benjamin Franklin. He helped bring organization and proper training to the Continental cavalry and became known as the Father of the American Cavalry.[3] He gave his life in 1779 to the cause of American independence during the Siege of Savannah.[4] Pulaski is also honored in the United States with an annual day of commemoration in Chicago and a monument in Washington, D.C.

The ties between the United States and Poland have continued to endure across the centuries. Since the fall of the Berlin Wall, Poland has become one of Europe's most consequential democracies. It has transitioned from a communist system to embracing free markets and democratic governance. Its commitment to free enterprise, capitalism, and the rule of law has contributed significantly to Poland becoming one of the fastest-growing economies in the European Union.

The U.S. Declaration of Independence spoke of the "pursuit of happiness." I view that phrase as encompassing the freedom to choose your occupation, start a business, place your capital at risk, and reap the rewards-or absorb the losses-of your own decisions.[5] It includes the opportunity to compete in a marketplace for goods, services, labor, and ideas. In so doing, it facilitates economic growth, jobs creation, and innovation.

A Nation of Owners

The idea that liberty includes economic freedom is not merely an American ideal. The leaders of Poland believed in the same idea at the end of the Cold War. In 1990, Lech Wałęsa took office as Poland's first democratically elected president since 1926. In his inaugural address, he set out a goal that Poland should become a "nation of owners."[6] He understood this as the surest way to rebuild the nation's wealth and restore economic efficiency and called for practical changes, including privatization, an independent state treasury, and reform of the banking and credit systems.[7]

Think about this moment in history. It was about turning a communist economy into a free market one. The phrase a "nation of owners" conveyed a concrete meaning. For two generations, ordinary people did not own or hold a stake in anything. All property was the property of the state. A free-market economy cannot suddenly be switched on like a machine, but must be built over time and based on the decentralized decisions of businesses and households, influenced by prices and local knowledge, to produce and consume.

Wałęsa's vision was ownership in the fullest sense where families would hold a stake in Poland's economy and business enterprises would be built, owned, and grown by their founders, rather than by the government.

Chairman Breeden's 1990 Project and the Continued Partnership

However, without risk capital, the notion of owning and creating a private business remains only a dream. It is the capital markets where those dreams can become reality. They are where companies can raise what they need to grow and innovate, and where the people of a country can share in that growth. The question facing Wałęsa was how to build them.

That conversation began in 1990 between the U.S. Securities and Exchange Commission ("SEC") and the emerging democracies of Eastern Europe. Then-SEC Chairman Richard Breeden delivered a speech before the Los Angeles World Affairs Council on the internationalization of securities markets, and much of his focus was on this region.[8] Poland, he reported, had asked the SEC for technical assistance on trading systems, the clearance and settlement of transactions, the licensing of market personnel, and enforcement. Hungary was about to reopen the Budapest Stock Exchange after 48 years of closure, and Poland was preparing to establish a stock exchange of its own. That February, a Soviet delegation had visited the SEC to learn how to build capital markets. Chairman Breeden called it "our Berlin Wall crumbing" for those in the securities field.[9] For Chairman Breeden, helping these countries build free markets was the "right thing to do" and a form of person-to-person foreign aid.

The SEC backed that vision with people and a program. In 1992, drawing on funding from the Support for an Eastern European Democracy Act,[10] the Commission placed a senior advisor inside the Polish Securities Commission for a year, where the advisor helped refine the country's securities laws.[11] These efforts would eventually reach well beyond Warsaw. In 1991, the SEC held its first International Institute for Securities Market Development, a signature initiative of Chairman Breeden that continues to this day and has trained thousands of regulators from over 100 countries.[12]

CEE Success Since the Cold War

What Central and Eastern Europe have achieved since 1989 is one of the great economic stories of the modern era. Across the region, growth has been remarkable. Since 1990, GDP per capita in countries like Poland and Hungary has grown many times over-more than fifteen times and eight times, respectively.[13] The transformation of capital markets has been just as striking. The number of publicly listed domestic companies in Poland grew from just nine in 1992 to around 750 today, and the market capitalization of those companies has risen from about $4.5 billion in 1995 to more than $300 billion now-from around 3% of GDP to over 20%.[14]

This growth has occurred throughout Central and Eastern Europe, at different paces but along similar institutional lines. The drivers have included trade, foreign direct investment, accession to the European Union, and institutional reform. Banks, both foreign and domestic, played an important role in financing that early growth-but the next step depends on capital markets in a way the early stages did not.

The Next Stage of Growth Needs Capital Markets

The financial markets can be particularly effective at allocating capital-a scarce resource-among competing ideas. They draw on many investors with differing appetites for risk, liquidity, and investment horizons, so they offer the ability to finance even the riskiest, most innovative ideas, in a way that bank lending cannot. In a bank-dependent economy, the most innovative ideas, which are often the riskiest, can struggle to take hold. In the United States, by contrast, new businesses can access a multitude of sources for finance, including venture capital, angel investors, and crowdfunding. Those investors actively seek risk and share in the upside, so the most disruptive ideas get backed more often. However, the risk of failure can be significant. Banks, by their nature and the deposits they hold, are not intended to take that kind of equity risk, which is why the capital markets play a crucial role.

In 2024, former European Central Bank President Mario Draghi released his report on European competitiveness. Europe's capital markets, he found, remain fragmented, and the flow of savings into them is lower than other major economies-only about 5% of global venture-capital funds are raised in the EU, compared to 52% in the United States.[15] While European households save more than American households, their savings are generally not channeled into higher risk, higher return investments.[16] The result, in the report's words, is that the EU "relies excessively on bank financing, which is less well-suited to fund innovative projects," with banks "ill-equipped to finance innovative companies," lacking the expertise to assess them and the means to value their largely intangible collateral.[17]

The pattern is even sharper across Central and Eastern Europe. The banking sector dominates the financial system of most countries in the region, and households hold a higher share of their financial assets in cash and deposits than the EU average-including in Poland, where households hold over half their financial assets in cash and bank deposits.[18]

Europe has recognized the need for change. The European Commission's Savings and Investments Union seeks to transform the roughly €10 trillion of EU household savings currently sitting in low-yield deposits into capital investment in firms that drive economic growth.[19] In Poland, the proposed Personal Investment Account-the OKI-aims to move savings into capital markets by offering tax-free returns on assets up to a certain amount.[20] These are meaningful steps toward unlocking the potential of capital markets.

At the same time, Europe is moving to ease the burden on business. After launching its "Omnibus" simplification effort in 2025, the EU adopted a directive this past February that narrows two of its most demanding sustainability mandates-the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive.[21] Framed as a matter of competitiveness, it raises the thresholds so that far fewer companies are covered and extends the compliance date for the due-diligence obligations to 2029.[22]

The SEC has been making similar adjustments in the United States. Several weeks ago, the Commission proposed to rescind its own climate-disclosure rule and return to financial materiality as the test on what must be disclosed. This is a reminder that financial regulation must focus on improving market quality and efficiency, not as a tool to achieve political and social goals in areas where legislatures and governments have failed to act. Disclosure serves investors and the markets best when it is tied to financial materiality and where the benefits of such disclosure outweigh the costs to produce such disclosure. I particularly worry about regulatory requirements that place the heaviest burden on smaller and newer companies, which may dissuade such companies from going public at all.

That points to a larger truth: capital does not stand still. When regulators fail to provide an optimal framework, market participants do not wait around-they go to where the rules work, and when they do, investors lose and competition suffers. The best way to keep capital at home is not to wall it in, but to build markets worthy of investors. This work is on-going in the United States as well. Over the past year, the SEC has reviewed its core disclosure rules to refocus them on what is financially material, to modernize the registered offerings process, and to expand accommodations for smaller and newer companies. The goal is to have regulations that create-on ramps to more public companies, not obstacle courses.

Conclusion

To close my remarks, I would like to express my sincere appreciation to the Catholic University of America for its dedication and efforts to facilitate closer ties between Poland and the United States. Millions of Americans have ancestral ties to Poland. Yet, for the duration of the Cold War, opportunities for person-to-person exchanges between our two countries were nearly non-existent.

I hope that the next chapter of Poland's will be shaped, in part, by a deepened connection between the Polish and American people, including in business, government, and education. Investments in the capital markets will be one element of that connection. Thirty-five years after this region's new start of freedom and opportunity, I look forward to watching this important partnership grow to new levels and achieve the mutual benefits that it will bring to our respective nations. Thank you.