Larry Summers Warns Trump's Push To Scrap Quarterly Earnings Will Affect How Markets Function: 'Students Don't Like Grades…'
News Summary
Former U.S. Treasury Secretary Lawrence H. Summers warned that President Donald Trump's proposal to eliminate quarterly corporate earnings reports could weaken accountability and transparency in U.S. markets. Summers drew an analogy, stating that just as students dislike grades, many business leaders dislike quarterly earnings reports because being monitored and accountable for results is painful, and this change would cause companies and markets to function less well. Trump renewed his call for the Securities and Exchange Commission (SEC) to shift from quarterly to semi-annual reporting, arguing it would save companies money and allow executives to focus on long-term growth, contrasting U.S. practices with China's "50 to 100 year" business outlook. The SEC, led by Chairman Paul Atkins, is reportedly prioritizing this issue. If enacted, the change would align the U.S. more with Europe, where quarterly reporting mandates were dropped in 2013-2014, though many companies still report voluntarily. Expert reactions are mixed. Analyst Joseph Carlson dismissed Trump's argument, stating that quarterly reports do not drive short-term thinking and warned that eliminating them would make stocks "more opaque, less updated, and [face] worse pricing." Conversely, market strategist Tom Lee said, "A 90-day cycle is not how business operates," and economist Trinh Nguyen noted that the U.K. and EU already operate without quarterly mandates, calling it a reform with bipartisan backing.
Background
The U.S. Securities and Exchange Commission (SEC) has required quarterly financial disclosures since 1970 to provide investors with regular, comparable financial information. President Donald Trump first floated the idea of eliminating quarterly earnings reports during his first term in 2018. At that time, Warren Buffett and JPMorgan CEO Jamie Dimon also urged companies to stop issuing quarterly guidance, though Buffett himself still favored earnings reports. Europe dropped mandatory quarterly reporting requirements in 2013 and 2014, although many European companies still choose to report quarterly voluntarily, providing an international precedent for the Trump administration's proposal. Currently, with President Trump re-elected in 2025, he is again pushing this reform, and the SEC is prioritizing its review, signaling strong executive intent and potentially leading to significant adjustments in U.S. financial market regulation.
In-Depth AI Insights
What are the true strategic motivations behind the Trump administration's push to eliminate quarterly earnings reports, beyond the stated reasons of cost savings and long-term focus? - Deregulation Agenda & Political Legacy: This move aligns perfectly with the Trump administration's consistent deregulation agenda, aiming to reduce corporate burdens and solidify its image as a "business-friendly" government. It could be framed as a significant economic policy legacy of his second term, appealing to specific business interest groups. - Reduced Short-Term Market Scrutiny: Less frequent disclosures could effectively reduce the quarterly market and media scrutiny companies face. This offers more breathing room for companies with volatile performance or those undergoing significant strategic shifts, potentially mitigating stock price pressure from short-term underperformance. - Differentiation from Competitors: While comparing the U.S. to China's "50 to 100 year" business outlook might be hyperbole, it reflects the Trump administration's desire to align regulatory frameworks with major economies (like Europe) and, to some extent, to mitigate what it perceives as "short-termism" impacting U.S. corporate competitiveness. What are the potential unintended consequences or systemic risks this change could introduce to U.S. capital markets? - Increased Information Asymmetry & Decreased Market Efficiency: Less frequent disclosure will significantly increase the information asymmetry between investors and companies. This could lead to stock prices failing to reflect fundamental changes in a timely manner, reducing market pricing efficiency, and potentially increasing trading costs and uncertainty. - Heightened Market Volatility and Vulnerability: When semi-annual reports are eventually released, markets may react more sharply to the accumulated information, leading to greater volatility. Information scarcity could make markets more susceptible to rumors and unsubstantiated news, increasing systemic risk. - Disadvantage for Retail Investors: Institutional investors typically have more resources for in-depth research and access to non-public information. Eliminating quarterly reports would further diminish retail investors' access to timely information, widening the gap between "information rich" and "information poor," and undermining market fairness. How might this policy impact the global competitiveness of U.S. capital markets and different investor segments? - Global Competitiveness & Transparency: Despite European precedents, U.S. capital markets have long been renowned for their high transparency and stringent regulation. Eliminating quarterly reports could be perceived as a step backward in transparency, potentially impacting international investor confidence in U.S. markets, especially amid growing global emphasis on corporate governance and ESG. - Wider Divergence Between Institutional and Retail Investors: Large institutional investors, with their research capabilities and information networks, may adapt more easily to an environment of reduced information, and even benefit from it (by gaining earlier access or better interpreting information). In contrast, retail investors and smaller funds reliant on public, regular disclosures will face greater challenges, potentially leading to less efficient capital allocation. - Cost Implications for Specific Industries: For growth companies requiring frequent financing or high market attention, reduced disclosure could increase their cost of capital or valuation uncertainty. Conversely, for mature companies with stable cash flows and less frequent financing needs, the cost savings might be more noticeable.