New Report: Conditions of 2008 Financial Crash Still Linger; Regulatory Response Needed

The conditions that led to the 2008 financial crisis remain stubbornly present in the current regulatory regime, according to a report (PDF) released today by the Corporate Reform Coalition.

Seven years after the crisis, regulators have failed to make sufficient progress on key components of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Regulators also have failed to boost transparency in political spending, which the report - "Still Too Big to Fail, Opportunities for Regulatory Action Seven Years after the Bear Stearns Rescue," cites as necessary for allowing shareholders to hold companies accountable.

"Avoiding another meltdown depends on the will of federal regulators to use the new powers they were granted in the Dodd-Frank Wall Street Reform and Consumer Protection Act," said Jennifer Taub, author of the report and professor of law at Vermont Law School. "If they behave as if they are beholden to the banks, we will likely face a more severe crisis in the future." Taub also is the author of the acclaimed financial crisis book "Other People's Houses."

In the report, Taub highlights six opportunities for strong regulation that would make bailouts for Wall Street firms less likely, such as reducing dependence by banks on short-term wholesale funding, closing loopholes in derivative regulation, strong incentive pay rules, clawback rules for bankers (provisions that require executives to return up to three years of compensation if their corporation has issued inaccurate financial statements and their pay was awarded based on those errors) and a requirement that all publicly traded companies disclose information about their political spending.

"More transparency on the part of Wall Street would better serve both our economy and our democracy," said Lisa Gilbert, director of Public Citizen's Congress Watch division. "Shareholders deserve to know how companies are spending their money to influence financial policy. Without transparency there can be no accountability."

This new call for corporate political spending disclosure adds to increasing pressure on the U.S. Securities and Exchange Commission (SEC) to act on a 2011 rulemaking petition calling on the agency to require publicly held companies to disclose political spending. The petition has garnered 1.2 million supportive comments from the public, as well as support from members of Congress, former SEC commissioners, state treasurers, investors and academics.

Today's report also notes that many companies already disclose some or all of their political spending information, so an SEC requirement to do so would be in step with a growing industry practice. This trend has been accelerated by calls from shareholders for more information about company political spending. Since the 2010 U.S. Supreme Court decision in Citizens United, which opened the door to unlimited corporate spending in elections, shareholders have filed more than 500 resolutions pertaining to company political activity.

Read the report (PDF).