It’s not their money but ours that they are putting in jeopardy. We have only just begun to recover from the Great Recession, brought about by their reckless behavior, while they can’t wait to do it again—since it is we who will suffer, not they. Who will stop them if not the regulators?
By DAVE MICHAELS, July 21, 2017 for The Wall Street Journal
WASHINGTON—Several regulators have dropped pursuit of a long-running plan to restrict bonuses on Wall Street, as part of a wider effort to stop working on unfinished rules put in place after the financial crisis.
Government agencies, including the Securities and Exchange Commission and several banking regulators, were directed under the 2010 Dodd-Frank law to develop compensation rules intended to curb excessive risk taking. Former President Barack Obama, during his last year in office, personally urged regulators to finish the rules before his term ended.
The six agencies delivered a new proposal in April 2016, but that was too late to push through a final version of the rule before President Donald Trump took office in January.
New regulatory agendas unveiled Thursday by the SEC and others show leaders excluded any mention of the restrictions, including longer deferment periods for bonuses and the amount of time payouts are subject to potential clawbacks. The proposal had targeted executives at some of the nation’s largest financial firms, including investment managers and mortgage-finance companies Fannie Mae and Freddie Mac, but the stiffest rules were reserved for big banks.
The shift, disclosed in a semiannual list of pending regulations federal agencies provide to the White House’s budget office, discloses how regulators in the Trump administration have started pulling back from postfinancial crisis rules. New SEC Chairman Jay Clayton has outlined a more business-friendly agenda, including promoting more ways for companies to raise capital in public markets. . . .
“Its pretty outrageous that independent financial regulatory agencies appear to be thumbing their nose at Congress and statutory mandates,” said Andy Green, managing director for economic policy at the liberal Center for American Progress. . . .
Government efforts to restrict traders’ and bankers’ bonuses prompted a lobbying counteroffensive by Wall Street. Financial regulators in turn have struggled for years to craft the joint rule, which Democrats in Congress intended to restrain risk taking at big banks and brokerage firms. . . .
The restrictions would have required the biggest financial firms to defer payment of at least half of executives’ bonuses for four years, a year longer than what is common industry practice.
The plan also would require a minimum of seven years for the biggest firms to claw back bonuses if it turns out an executive’s decisions hurt the institution or if a firm has to restate financial results. . . .
The list also dropped two measures that began under former SEC Chairman Mary Jo White, who was appointed by Mr. Obama. One rule would make it easier for shareholders to vote on board candidates nominated by investors, as opposed to the slate backed by the company. Another would have required companies to disclose more about the racial and gender diversity of corporate boards. Ms. White urged businesses to do more to recruit women and minorities to their boards, saying the “low level of board diversity in the United States is unacceptable.”
—Rachel Witkowski contributed to this article.