For Immediate Release
Report: Wall Street Tries to Opt Out of Dodd-Frank Pay Rule
Financial Sector Inundates Agencies With Requests for Exceptions to Rule
WASHINGTON - As the first anniversary of the Dodd-Frank financial reform law passes, Wall Street is pressing to excuse itself from a rule specifically designed to address one the main causes of the financial meltdown: inappropriate incentive compensation packages.
A report released today by Public Citizen analyzes the comments of 24 financial services companies, trades associations and allied groups on the proposed rule pertaining to Dodd-Frank Section 956, which requires large financial institutions to report their incentive-based pay arrangements to federal agencies and prohibits pay formulas that “encourage excessive risk.” The report, “Just Not Us,” is the second installment in Public Citizen’s “Two Cents” series examining Wall Street’s efforts to weaken regulatory implementation of key Dodd-Frank provisions.
In addition to the 24 companies that filed formal comments, six more met with regulators during the comment period to lobby on the rule. The 30 industry organizations covered in the report have spent $242.2 million to deploy 712 lobbyists to influence the government on financial services matters and other issues since the beginning of 2010. These companies also made $15.6 million in federal political contributions.
Industry comments on the proposed rule centered on a common theme: More than 70 percent of commenters asked to be partially or entirely exempted from the rule. Some also asked for whole classes of jobs or for types of pay to be excluded. For example, a large trade association for the banking industry asked for companies’ subsidiaries to be exempted and for the rule’s requirements on incentive-based pay to be limited to pay specifically labeled as an “annual bonus,” and not, for instance, multi-year bonuses.
SCROLL TO CONTINUE WITH CONTENT
The media landscape is changing fast
Our news team is changing too as we work hard to bring you the news that matters most.
Change is coming. And we've got it covered.
“Wall Street is asking the regulators for exemptions that would defy the clear language and intent of Dodd-Frank,” said David Arkush, director of Public Citizen’s Congress Watch division. “The history of financial crises shows that if we carve out any significant portion of the financial sector from key rules, we can expect the exempt firms to balloon and become the locus of the next financial crisis.”
Aside from seeking exemptions from the rule, commenters sought to weaken it with pleas to increase deference to companies’ boards’ and management teams (even though the proposed rule affords exceedingly broad discretion already), to downgrade the proposed rule to a guideline or to scuttle a provision in the rule that would require brief deferral of a portion of the incentive-based pay for top employees of the largest financial institutions.
Substantive criticisms were largely limited to complaints that the rule would limit Wall Street’s ability to recruit talent or that the rule was “burdensome,” too “prescriptive” or amounted to a “one-size-fits-all” solution.
“It’s outrageous that the public’s voice would ever be deemed less important than industry dollars,” said Public Citizen researcher Negah Mouzoon, a co-author of the report. “It’s time for federal agencies to acknowledge that Main Street’s two cents should weigh more than Wall Street’s $243 million.”
We want a more open and sharing world.
That's why our content is free. Free to read. Free to republish. Free to share. With no advertising. No paywalls. No selling of your data. How? Nonprofit. Independent. Reader-supported.
All of our original content is published under Creative Commons—allowing (and encouraging) our articles to be republished freely anywhere. In addition to the traffic and reach our content generates on our site, the multiplying impact of our work is huge and growing as our articles flourish across the Internet and are republished by other large and small online and print outlets around the world.
Several times a year we run brief campaigns to ask our readers to pitch in—and thousands of small donations fund our newsroom and allow us to continue publishing. Our 2019 Mid-Year Campaign is underway. Can you help? We can't do it without you.
Public Citizen is a national, nonprofit consumer advocacy organization founded in 1971 to represent consumer interests in Congress, the executive branch and the courts.