Financial Reform Reports
The Use of Deferred and Non-Prosecution Agreements With Large Financial
Institutions In The Age of “Too Big To Jail”
July 8, 2014
Prior to 2001 the Department of Justice (DOJ) rarely
entered into deferred prosecution and non-prosecution agreements (DPAs and
NPAs) with financial institutions in lieu of criminal prosecution. Since then, DPAs and NPAs, which
are agreements in which companies may or may not admit to wrongdoing and
agree pay fines, have become the DOJ’s
preferred tool for white collar criminal law enforcement.
The increasing use of DPAs and NPAs has raised the
question of whether the DOJ maintains a “too big to jail” policy which favors
banks that, because of their size and systemic importance, cannot be prosecuted for fear of seriously damaging the
economy. This report details the DOJ’s increasing reliance on these types of agreements, and concludes that the
transition has occurred without complete transparency as to why the agency
enters in to agreements with companies rather than pursuing criminal
prosecution. The DOJ should publicly disclose if and when it is providing
favorable treatment under the law to financial institutions so that Congress
can exercise its oversight authority. Read the report.
Evaluating the Rulemaking Progress at the Securities and
June 23, 2014
2013 nomination of Mary Jo White to chair the Securities and Exchange
Commission evoked a mixed reaction. Some applauded her nomination because of her background as a
former prosecutor who once led the U.S. Attorney’s Office for the Southern
District of New York (SDNY). Others worried that her subsequent career as a
white collar criminal defense attorney at Debevoise & Plimpton might negate
that history of prosecution. Commenters, including former colleagues, agreed on
one positive trait: she gets things done efficiently.
At her confirmation hearing, White pledged to “finish in as timely and smart a way as possible” the rule-making mandates.
However, Public Citizen's analysis shows that White has now delayed the proposed completion date for SEC completion of final rules in 64 percent of the cases. Read the report.
Banks, Big Appetites:
The Consequences When Banks Swallow Commodities
April 10, 2014
As the Federal Reserve Board revisits a critical
policy concerning whether Wall Street mega-banks may own commodities, a new
Public Citizen report concludes that for the sake of consumers and the
financial system, regulators and lawmakers should establish a strong wall
between banks and commerce.
Not only does bank control of metals, oil, food
and other commodities enable Wall Street to monopolize markets and drive up
prices, but it puts the financial system – and taxpayers – at risk. Banks buy
commodities with borrowed, federally insured deposits so a natural disaster or
catastrophic event can create billions in liabilities. When a bank lacks its
own capital to cover these liabilities, taxpayers may be stuck with the bill. Read the report.
A Matter of Perspective:
Added Costs From a Financial Transaction Tax Would Be
Minuscule Compared to Fees Investors Already Pay
March 12, 2014
A financial transaction tax
(FTT) would cost ordinary investors just a minuscule amount compared to costs
and other hidden fees they already bear, while bringing in revenue and
discouraging risky trading practices, a new Public Citizen report shows. The
report, “A Matter of Perspective,” analyzes the costs that would be paid by a
hypothetical investor who invests his or her money either in a mutual fund or a
self-directed portfolio of individual stocks.
If the person invested
$85,000 (representing roughly the average size of a 401(k) account) in a mutual
fund with average fees and asset turnover rates, that investor now would spend
$1,144 a year in fees and hidden costs, the report concludes. In comparison,
the investor would pay only $24.48 in annual costs resulting from a 0.03
percent FTT. If one includes an FTT purchase tax on an $85,000 investment, the
investor’s total, first-year FTT-related costs would be just $49.48.
Similarly, an investor who
buys and purchases his or her own individual stocks currently pays about 13
times more in costs than the investor would pay for in annual costs resulting
from a 0.03 percent FTT, the report shows.
Read the report.
Thanks a Billion (or So):
Small Loophole Inserted 20 Years Ago Helps Companies Avoid Paying the U.S.
Treasury Big Money
Nov. 11, 2013
In 2012, the ratio of
CEO-to-median worker pay had soared to 354:1. Meanwhile, corporations have avoided paying
taxes on their executives’ huge paychecks by paying them primarily on the basis
of incentives, sometimes of questionable legitimacy. The top 20 highest-paid
CEOs in the most recent version of the AFL-CIO’s annual list of highest-paid
CEOs were paid base salaries totaling $28 million, but had performance-based,
tax-deductible compensation totaling more than $738 million. Assuming that these CEOs’ companies paid a
corporate tax rate of 35 percent, tax-deductible performance-based compensation
for these CEOs cost American taxpayers as much as $235 million in lost tax
revenue. To address the
unintended loophole in section 162(m), Congress should pass the Stop
Subsidizing Multi-Million Dollar Corporate Bonuses Act.
Read the report.
Why It's Time to Restore 1930's Separation of Banking and Gambling
June 19, 2013
Eighty years ago, President Franklin Roosevelt signed the National Banking Act, also known as “Glass-Steagall,” in reference to Sen. Carter Glass (D-Va.) and Rep. Henry Steagall (D-Ala.). The law socialized deposit insurance, with creation of the Federal Deposit Insurance Corp. In exchange for guaranteeing the deposits of bank customers, Glass-Steagall steered FDIC banks into engaging in socially useful activity, notably making loans to businesses and consumers. Whether Glass-Steagall would have prevented the financial crash of 2008 will be endlessly debated in policy circles, but the case for reinstatement draws widespread and sometimes unexpected support. Read the report.
Business as Usual:
99.9 Percent of Banks Would Not Be Affected by Volcker
Dec. 13, 2012
The Volcker Rule,
among the most controversial aspects of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, will prohibit federally insured banks from engaging in
proprietary trading, which involves speculation through short-term trades in stocks,
derivatives and other securities.The financial crash, borne of reckless banking
practices, cost the economy about $12 trillion. But Wall Street lobbyists have
sought to water down the rule based on relatively
miniscule costs that it would impose on them. A new Public Citizen report
shows that most bankers have little to fear. In reality, the Volcker
Rule will mean no change, no closure of business divisions, no costs from
foregone financial activity, for more than 99.9 percent of banks.
Read the report.
Delayed and Diluted:
At Anniversary, Dodd-Frank Reforms Remain Unfulfilled
Due to Industry Obstruction
July 20, 2012
Two years after Congress approved the Dodd-Frank Wall Street Reform and Consumer Protection Act, many of the law’s primary provisions have yet to take effect. This delay largely results from a multi-pronged industry campaign to both weaken and delay regulations called for in the act.
Where Congress set deadlines to complete regulations to implement the law, agencies have missed their marks 79.4 percent of the time. Additionally, many rules that have been completed or are nearing completion fall short of providing the level of protection that Congress called for in the law. As a result, many of the very problems that prompted the passage of Dodd-Frank continue to endanger our economic stability.
Read the report.
The Repo Ruse: Scheme in Which Loans Are Mislabeled As Sales Continues to Endanger the Financial System
May 17, 2012
In the run-up to the 2008 financial crisis, banks depended
increasingly on an unreliable method of funding their activities, called
“repurchase agreements,” or repos. Repos may look like relatively safe
borrowing agreements, but they can quickly create widespread instability in the
financial system. The dangers of repos stem from a legal fiction: despite being
the functional equivalent of secured loans, repo agreements are legally defined
as sales. Dressing up repo loans as sales can lead to sloppy lending practices,
followed by sudden decisions by lenders to end their risky lending agreements
and market panics. Repos also permit financial institutions to cover up
shortcomings on their balance sheets. The problems in the repo market were
exposed as the 2008 financial crisis unfolded, yet the risks posed by repos
remain largely unaddressed. Without reform, the financial system will remain
susceptible to the sudden and severe shocks that repos can cause. Read the report.
Forgotten Lessons of Deregulation: Rolling Back Dodd-Frank’s Derivatives Rules Would Repeat a Mistake that Led to the Financial Crisis
Industry's Messengers: Wall Street's "Two Cents" on the Volcker Rule
May 14, 2012
debate continues over some of the root causes of the 2008 financial crisis,
there is little dispute that inadequate regulation of derivatives was a major
contributor. This new Public Citizen report chronicles the flawed arguments
that were used to deregulate derivatives during the Clinton administration and
how the decision to do so led to the worst economic crisis since the Great
Depression. But many have forgotten these recent lessons. At least nine bills
have been introduced in Congress that would erode the derivatives reforms in
the Dodd–Frank Wall Street Reform and Consumer
Protection Act of 2010—even as the nation is still recovering from the disaster
that unregulated derivatives caused in first place.
Read the report.
March 27, 2012
This is the third installment of our "Two Cents" series, in which documents Congress’s efforts on behalf of the financial industry regarding the Volcker Rule, which was
one of the most important reforms in Dodd-Frank. Members of
Congress who submitted comments asking federal agencies to weaken the Volcker
Rule have received an average of more than four times as much in campaign
contributions from the financial sector since 2010 as those who asked agencies
to strengthen the rule. Read the report.
Banking on Failure: Speculators' Use of Credit Default Swaps Dangerous
Nov. 11, 2011
Betting on the misfortune of others has an unsettling quality to it. It just feels wrong. Under our current financial regulatory regime, speculators freely gamble on businesses failing and countries defaulting. In addition to its unseemliness, betting on others’ failure poses a grave risk to our financial system. Read the report.
Just Not Us: Wall Street's "Two Cents" on Pay Rule: Self-Preservation, Not Principle
July 21, 2011
The second installment in our "Two Cents" series examines the financial services industry's efforts to undermine the proposed rule in Section 956 of Dodd-Frank, which covers incentive-based compensation that “encourages inappropriate risks.” We review 24 financial services industry companies, trade associations, and their allies that submitted comments seeking to weaken the proposed rule. The primary theme of industry’s comments: “Please exempt us from this rule.” Read the
Industry Repeats Itself: The Financial Reform Fight
July 12, 2011
With the one year anniversary of the Wall Street Reform and Consumer Protection Act approaching – and the inevitable industry hand-wringing that will accompany the July 21 occasion – Public Citizen and the Cry Wolf Project decided to take a look back at what industry said during the last major financial reform era: the Great Depression. Read the
Wall Street's "Two Cents": Industry’s Opposition to a Modest Pay Disclosure Rule
April 12, 2011
This is the first report in our Two Cents series, in which we will document the efforts of special interests to influence the rules that will determine the success or failure of Dodd-Frank. Each report will examine the lobbying expenditures, campaign contributions and “revolving door” connections of the most strident opponents of reform. Our inaugural installment looks at pre-rulemaking efforts to weaken the implementation of the financial reform bill’s requirement that companies registered with the Securities and Exchange Commission to reveal how much their CEO makes in comparison to their average employees. Read the
Hourly Rates: A Modest Essay About Extraordinary Paychecks
March 23, 2011
Every fourteen minutes in 2009, hedge fund manager David Tepper made President Obama's annual salary. With 2010 compensation figures forthcoming as companies prepare for annual meetings, here's a baseline
Wall Street Receipts: Pro-TARP, Anti-Reform Legislators Outpace Colleagues in Financial Services Contributions
September 23, 2010
Members of Congress who voted Wall Street’s way on the two most important financial services bills over the past two sessions of Congress—the 2008 TARP bailout and the 2010 financial reform bill—have received more in campaign contributions from the financial sector in the last two election cycles than those who opposed Wall Street on either or both measures, according to Public Citizen’s analysis of voting records and of contribution data provided by the Center for Responsive Politics (www.opensecrets.org). Read the report.
Courting the New Dems (PDF)
June 21, 2010
The 43 members of the New Democrat Coalition who last week sent a letter urging House-Senate negotiators to weaken the financial reform bill’s regulation of derivatives have received an average of 44.1 percent more campaign contributions from the financial services sector in the current election cycle than have the 25 coalition members who did not sign the letter, according to Public Citizen’s analysis of data from the nonpartisan Center for Responsive Politics (www.opensecrets.org). Accounting for all campaigns since the 1998 election cycle, signers have received 44.6 percent more than non-signers, on average. Read the report (PDF).
Conference Klatch: The 43 House and Senate Members Negotiating Final Wall Street Reform Legislation Will Be Lobbied by 56 of Their Former Staffers (PDF)
June 11, 2010
Lobbyists for the financial services industry enjoy longstanding ties to the members of Congress who were named this week to the conference committee on financial reform legislation, according to a joint analysis of available data released today by Public Citizen and the Center for Responsive Politics. Read the report (PDF).
Banking on Connections
June 3, 2010
Organizations in the financial services sector have deployed at least 1,447 former federal employees to lobby Congress and federal agencies since the beginning of 2009, according to a joint analysis of federal disclosure records and other data released today by Public Citizen and the Center for Responsive Politics. Read the report.
Looking for a Free Ride (PDF)
May 24, 2010
So far in the 2010 election cycle, 44 senators have received $380,693 from the auto dealer industry’s employees and political action committees (PACs), according to Public Citizen’s analysis of data provided by the Center for Responsive Politics. The ten largest recipients – seven Republicans and three Democrats – have received more than half of the industry’s contributions to the Senate this cycle. Read the report (PDF).
Eleven to One (PDF)
May 18, 2010
Since the beginning of 2009, nearly 1,000 lobbyists have worked on at least one of nine key bills designed to rewrite the rules governing derivatives, a new Public Citizen report shows.These lobbyists have overwhelmingly represented organizations opposing or attempting to water down proposed regulation, according to Public Citizen’s analysis of lobbying disclosure data filed with the U.S. House of Representatives.Lobbyists representing opponents of strong derivatives reform have outnumbered pro-reform lobbyists by more than 11-to-1 (903 to 79 lobbyists). Among the clients represented by the anti-reform lobbyists were the nation’s five largest banks, several major financial trade associations and the U.S. Chamber of Commerce. Read the report (PDF).
December 15, 2009
The CEOs of 10 Wall Street firms that either failed or received taxpayer bailouts were paid an average of $28.9 million per year in the years leading up to the Wall Street meltdown, according to a Public Citizen report. Their average pay this decade, calculated through 2007, equaled 575 times the median American family’s 2007 income.“Fat cat compensation has nothing to do with good corporate performance,” Public Citizen President Robert Weissman said. “These CEOs were exorbitantly compensated for driving their companies off the cliff. At a minimum, Congress must ensure that corporate leaders are paid for long-term performance, not short-term illusions. Read the report.
Investments in the Opponents of Reform
December 8, 2009
Representatives sponsoring two amendments that would weaken critical consumer protections in financial reform legislation have received at least $2.3 million from the financial services sector since the beginning of 2009, according to Public Citizen’s analysis of data provided by the Center for Responsive Politics. Read the report.
CA$HING IN: More Than 900 Ex-Government Officials, Including 70 Former Members of Congress, Have Lobbied for the Financial Services Sector in 2009
November 19, 2009
Since the beginning of 2009, organizations in the financial services sector – including banks, investment firms, insurance companies and real estate companies – have commissioned 940 former federal employees as federal lobbyists, Public Citizen’s analysis of data provided by the Center for Responsive Politics (www.opensecrets.org) shows. Read the report.
Financial Industry Invests Heavily in Key Lawmakers
November 16, 2009
As Congress considers legislation to reregulate the financial services industry in response to the greatest economic downturn since the Great Depression, the industry is focusing campaign contributions on the congressional leadership and members of the committees crafting reform legislation. Read the report.
August 26, 2009
Lobbyists, political action committees (PACs) and trade associations tied to the banks receiving the most federal bailout money have scheduled 70 fundraisers for members of Congress since Election Day and have made $6 million in federal campaign contributions, according to a Public Citizen report. Read the report.