Co-sign our Letter to Federal Regulators Demanding Action on Dodd-Frank Section 956
One of the key provisions (Section 956) of the Dodd-Frank legislation passed after the 2008 financial crisis was designed to curb the excessive risk-taking that many bank CEOs had engaged in leading up to the crisis. It directed federal regulators to promulgate a rule banning incentive-based executive pay that tends to encourage inappropriate risk-taking.
However, 14 years later, no such rule has been implemented. Even after the 2023 banking crisis – which can be traced directly to risky behavior on the part of executives at Silicon Valley Bank (and others) – we still don’t have regulations in place to protect consumers, depositors, and the public from executives’ excessive risk-taking.
This is unacceptable -- so we’re mounting a campaign to pressure the regulatory agencies to finally do their jobs and implement the rule as mandated by law.
Add your name to co-sign our letter and help demonstrate broad public support for a strong section 956 rule!
Our letter is below:
| Dear Chairs Powell, Gruenberg, Gensler, and Harper, Vice Chair Barr, Acting Comptroller Hsu, and Director Thompson: In the wake of last year’s banking crisis, we wrote to you to urge you to finalize section 956 of the Dodd-Frank Act, which requires you to promulgate a rule banning incentive-based executive pay that incentivizes inappropriate risk-taking. A year after the 2023 banking crisis -- and almost fourteen years after the statutory mandate was enacted -- we do not have a rule to protect consumers, depositors, and the public from executives’ excessive risk-taking. The importance of the long-delayed rule became poignant in the wake of last year’s banking crisis, with the Federal Reserve’s own post-mortem report on the failure of Silicon Valley Bank concluding that “[t]he incentive compensation arrangements and practices at SVBFG encouraged excessive risk taking to maximize short-term financial metrics” and that “[s]tronger or more specific supervisory guidance or rules on incentive compensation … may have mitigated these risks.” At this time, many called on you to finalize this long-overdue rule, including members of Congress, President Biden, and a broad coalition of organizations. While the 2023 banking crisis may be in the rear-view mirror for some, you must not abdicate your statutory obligation to finalize this important rule. After all, in addition to the 2008 crash that precipitated the Dodd-Frank Act and the 2023 banking crisis that brought renewed attention to the issue, examples of connections between incentive-based pay and excessive risk-taking abound, including JP Morgan’s London Whale loss, Wells Fargo’s fake account scandal, and Goldman Sachs’ bribery case in Malaysia. Implementation of a strong section 956 rule would go a long way in preventing such disasters in the future by better aligning the incentives of executives with the interests of consumers, depositors, and the public. We hope you will not wait until the next crisis to finalize this critical rule. Signed, |
