Robert J. Jackson, Jr. is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on his recent public statement, available here. The views expressed in the post are those of Commissioners Jackson, and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff. Related research from the Program on Corporate Governance includes Regulating Bankers’ Pay by Lucian Bebchuk and Holger Spamann (discussed on the Forum here); and The Wages of Failure: Executive Compensation at Bear Stearns and Lehman 2000-2008 by Lucian Bebchuk, Alma Cohen, and Holger Spamann (discussed on the Forum here).
[On September 18, 2019], the Commission finalized the rollback of the Volcker Rule—the risktaking limits that keep banks from gambling with taxpayer money. These limits are designed to help regulators address a basic problem of incentives: bankers, anticipating taxpayer-funded bailouts, prefer to take excessive risks to maximize their bonuses. [1] That’s why I’ve called upon my colleagues to finalize the rules required by the Dodd-Frank Act to prohibit pay practices that reward excessive risktaking. Instead, having done nothing about banker bonuses, we are weakening structural limits on risk.
As always, I am grateful to my colleagues on the Staff in the Division of Trading and Markets for their hard work. But, as I said at the proposal stage, “[r]olling back the Volcker Rule while failing to address pay practices that allow bankers to profit from proprietary trading puts American investors, taxpayers, and markets at risk.” [2] That’s no less true today than it was a year ago, so I respectfully dissent.
