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March 24, 2020

A Review of Our Work Responding to the Coronavirus Human, Economic & Financial Crises (and Our Ongoing Regulatory & Legal Work)

Better Markets exists to promote the economic security, opportunity and prosperity of the American people by fighting for a financial system that supports the real economy, jobs and growth while serving as a Wall Street and government watchdog.  We have been continuing, and even increasing, our work  as the Coronavirus pandemic has morphed from a health crisis into a human, economic and financial crisis. 

Many things are happening simultaneously and are moving very quickly.  To stay on top of our work and views, please follow us on twitter (@bettermarkets) and our website: www.bettermarkets.com.

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Here’s a quick summary of our recent Coronavirus-related activities:

  • On March 2nd, we were the first to call out the financial industry when it tried to preemptively use the pandemic as a pretext to weaken financial rules that they have been lobbying against since 2010. Read our release: “Wall Street’s Biggest Banks Shamelessly Trying to Use Coronavirus to Get Federal Reserve to Weaken Rules.” 
  • We were also the first to call on the financial industry to stop all capital distributions via stock buybacks, dividends or otherwise.  Given the threat posed to the financial system, banks need to be as strong as possible and therefore should engage in self-help and not weaken their capital positions.  When the banks didn’t voluntarily do that, we reiterated the call as the President met with the CEOs of Wall Street’s largest banks on March 10th and again following the meeting.  .
  • When the Treasury Secretary suggested weakening some of the most fundamental and important financial reforms enacted after the 2008 crash, we publicized it and ensured that people knew what was at stake and how misguided and dangerous it was.
  • On March 11, we called on the SEC to not use the coronavirus as an excuse to de-regulate in the dark.
  • We also called for all pending financial deregulation to be suspended until the crisis is over. 
  • We were the first to call for a $1 trillion-plus emergency rescue plan.  When the House was passing its $105 billion plan to respond to the coronavirus (now the so-called “step 2”), we said that a much bigger plan was needed and we proposed, in an Op Ed featured in MarketWatch, a “$1 trillion plan to save the economy when the coronavirus forces everyone to quarantine.”  That was basically what former Goldman Sachs’ CEO Lloyd Blankfein suggested, which we highlighted here.
  • We were also the first to propose using employer’ payment systems to pay all employees’ wages, tips and benefits as a condition for any corporation receiving any bailouts or assistance.  Subsequently, Sen. Doug Jones suggested the same process on MSNBC; Steve Pearlstein of the Washington Post did as well, although reasoning differently; and Andrew Ross Sorkin proposed something similar in the New York Times using bridge loans.
  • Finally, we recently published an Op Ed in Morning Consult: “7 Steps Congress Must Take to Stop the Coronavirus Economic, Financial Collapse.”  This is a comprehensive Main Street-focused plan that puts people first, would calm the panic, and would make the downturn as short and shallow as possible.

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We have also been active in the federal courts, including the Supreme Court, and at the regulatory agencies:

  • We filed an amicus brief in the Supreme Court supporting the SEC’s disgorgement power, which requires wrongdoers and criminals to give up the money they ripped off so the SEC can return it to the victims.  The Supreme Court held oral argument in that case on March 3rd and we highlighted the enormous importance of the case here: “Should Scammers Get to Keep the Money They Steal?”  
  • The Fed announced a dangerous, unwise, unnecessary and poorly timed proposal that would lower capital requirements for some of the country’s biggest banks, which we commented on here.  Capital requirements are the only thing that stands between a failing bank and a taxpayer bailout, so  capital requirements should  be increased not lowered.
  • We have been active at the Commodities Futures Trading Commission (CFTC) on a number of critical rules, including the following:
    • Cross-border regulation of foreign derivative risks that threaten the US: We filed a comment letter with the CFTC on a proposal to deregulate the way the US currently regulates cross-border derivatives transactions that threaten the US financial system and economy.  This is extremely important because cross-border regulatory arbitrage was a key accelerant in the 2008 crash and resulted in US taxpayers bailing out innumerable foreign derivatives deals and dealers, as we discussed in the comment letter and this fact sheet.
    • Post Trade Name Give Up: We filed a comment letter with the CFTC on a complicated but important proposal that would help the derivatives markets function in a safe and sound, fair, and competitive manner.  See our plain English, easy to understand release here.  The proposal, done correctly, would help break up the oligopoly of the five biggest Wall Street banks, which control about 90% of the US derivatives market.  We explained how to best ensure that they could no longer use their market power to kill competition, prevent market entry and create systemic risk.
    • Capital Requirements: We filed a comment letter on capital requirements of swap dealers and major swap participants.  Unfortunately, this proposal could establish dangerously inadequate capital requirements and must be re-proposed with the benefit of sufficient information to ensure the safety and soundness of swap dealers, as our release discussed here
  • We have also been active at the Securities and Exchange Commission (SEC) regarding its rulemaking, including the following:
    • We opposed the SEC’s deregulation proposal to weaken the quality of financial statements, which will harm all investors and our markets.  To prevent future financial frauds like Enron and WorldCom, the law requires CEOs to personally certify that their financial statements are materially accurate, and that their internal controls are adequate. Because this creates personal liability for the CEOs, it is a very powerful tool to ensure corporations prioritize these vital controls that are key to protecting investors.
    • In response to the SEC’s proposed rule governing the disclosure of payments by resource extractive issuers, we filed a comment letter arguing that the SEC’s proposal would favor corporate intersts over those of shareholders and others concerned about corruption in the resource extraction industry. The SEC rule, which is mandated by the Dodd-Frank Act, is supposed to provide transparency and reduce corruption risks. The SEC, in order to limit unsupported claims of compliance costs, would permit US companies to pay essentially limitless amounts to foreign governments or their officials to obtain license to operate in their countries. This would green-light corruption and be harmful to shareholders.
    • In another comment letter, we  opposed the SEC’s proposal to allow highly illiquid and risky investment products be peddled to investors who lack the financial wherewithal to withstand the likely losses associated with such investments. The SEC’s proposal lacked basic analysis why investing in companies that provide little to no informationa about their financial health or business prospect would be good for investors.  These companies have been shunned by all the smart money (i.e., banks, friends and family, angel investors, venture capital, or other sophisticated institutional or high-networth investors) yet the Commission wants to expose currently non-Accredited Investors to such investments.
  • We joined 15 other organizations, including NAACP, Allied Progress, Consumer Action and Americans for Financial Reform, in opposing a  Request for Information (RFI) from the Office of Management and Budget (OMB) misleadingly entitled “Improving and Reforming Regulatory Enforcement and Adjudication.”  As we spelled out in a Fact Sheet, OMB’s RFI is clearly aimed at making it even harder for struggling agencies to bring enforcement actions against the bad actors who commit fraud and abuse against investors.  As we say in our Fact Sheet, the Administration “once again stands up for the bad guys by seeking to disarm the cops on the beat.”
  • We also joined dozens of other groups in calling on the financial regulatory agencies to enact a 90-day tolling period or extension of the comment periods for all outstanding rulemakings. 
  • We also joined a similar coalition of organizations calling on independent agencies and relevant cabinet-level departments to cease on approving or proposing regulatory actions not related to the coronavirus.
  • We co-authored an article in the Duke Law School Global Financial Markets Center’s FinReg Blog on the SEC’s so-called “Regulation Best Interest” rule.  The article highlights the arguments in our amicus brief,which exposes the many flaws in the rule, including its fraudulently misleading title: Far from ensuring that brokers will act in their clients’ best interest, it fails to protect investors and, indeed, will mislead many into thinking they are protected when they are not. 

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