Federal financial regulators have been working to cut back restrictions on banks, publicly held companies, and financial representatives. The argument is that it’s all necessary to cut friction on business and let it grow.
This argument has frequently fallen apart in practice, whether the conditions that brought about the Great Depression, recessions in the 1950s, the energy crisis in the 1970s, the savings and loan crisis from the 1980s to the 1990s, the dot-com disaster, the Great Recession, the 2025 stock market crash, and whatever name is eventually used to term the current combination of conditions. And that’s just in the U.S.
Talk to people in finance who have been around long enough to remember enough of the past and you’ll hear agreement on a pattern, Bad decisions lead to problems, problems ultimately blow up, and people decide to never let that happen again. Until, of course, they eventually grow older and retire, leaving a critical lack of experience and knowledge. The newer people are sure they know better and that there wouldn’t be problems again. Except, it’s often something similar if not exactly the same. Reducing regulation almost always comes with various increased risks.
Ending Mandatory Quarterly Reporting By Public Companies
One of the suggested changes in regulations by the Securities and Exchange Commission is to end quarterly reporting requirements for U.S. public companies, allowing semiannual reporting instead.
“Our proposal would provide an Exchange Act reporting company with the flexibility to determine the frequency of interim reporting that best suits its particular circumstances, such as its ability to bear the costs of preparing the quarterly reports, the stage of its business development, and the expectations of its investors, without undermining fundamental investor protections,” the SEC wrote.
“Providing such regulatory flexibility could reduce the.regulatory burden of being a reporting company, which could potentially influence a company’s decision to become or remain a reporting company and encourage more companies to go or remain public. These proposed amendments would not substantively affect investment companies except for business development companies and face-amount certificate companies.”
The Harvard Law School Forum on Corporate Governance wrote that the compliance burden imposed on companies was an important topic for discussion and that that smaller companies would be more likely than larger to opt for semiannual filing. However, they also thought that investors would file official comments “highlighting the importance of quarterly financial reporting, especially for retail investors who do not have direct access to issuers, and expressing the view that quarterly reporting contributes to market efficiency and provides a lower cost of capital.”
Overall, the SEC seems to be focusing on the convenience of the reporting company, when the organization’s mission is “protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.” If critical information arrives only twice a year rather than four times a year, there are fewer chances for investors, whether regular individuals, wealthy so-called family offices, or institutions.
Reducing Bank Oversight
There have been moves since at least last year to pull back or reduce major bank regulations that were a result of bank activities during the Great Recession. Over at least the last 40 to 50 years, there’s been some enormous problem in finance that started with deregulation and risky speculation and financial “innovation”: the attempt by the Hunt brothers to corner the silver market in 1980, the Savings and Loan Crisis of the 1980s, the dot-com bubble of the late 90s and early 2000s, Long-Term Capital Management’s implosion in the late 1990s that used a hedge fund structure to avoid a lot of financial regulation, the GFC and Great Recession of 2008 and into the 2010s that came in part because of the repeal of the Glass-Steagall banking reforms of the 1930s, and crypto exchange collapses in the 2020s.
As my Forbes senior contributor colleague and banking regulation expert Mayra Rodriguez Valladares recently wrote, Americans can’t afford a weakening of bank regulations. She mentioned that in her testimony for the House Committee on Financial Services, “there is no serious quantitative case for weakening bank regulations today.”
There is geopolitical instability, greater bank exposure to nonbank financial institutions like private credit, rapidly rising cybersecurity and AI risks, and more material and less predictable climate-related financial risks. Consumer saving rates are 3.65% of disposable personal income, the lowest it’s been since July 2008. Job markets are challenged and consumer sentiment is at a 74-year low. Inflation is on the rise.
“Today’s conditions—elevated consumer leverage, declining savings, rising delinquencies, and geopolitical instability—create a backdrop in which even a modest shock could propagate quickly through the financial system,” she wrote. “In that environment, strong capital is not a constraint on growth; it is a prerequisite for sustained economic stability.”
Stability Over Excitement
Many industries have at times indulged in risky behavior, resulting in disasters. Financial services and frameworks have provided some of the most obvious examples. Even if the economy were much stronger than today, it would likely increase risk because of all the historical evidence that shows what people in charge of banks, companies, and other institutions are capable of doing.
Some regulations may be overbearing, but most come from problems that have happened and regulators who reasonably don’t trust executives to act in good faith.
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