Clinton seeks crackdown for those breaking Wall Street rules
Published 2:50 pm Saturday, October 10, 2015
WASHINGTON — Just days before the first Democratic debate, Hillary Rodham Clinton released a series of proposals aimed at cracking down on bad behavior by Wall Street, vowing that individual bankers who violate the law will be “prosecuted and imprisoned.”
A new proposal released by her campaign would impose a graduated “risk fee” on financial companies with more than $50 billion in assets that would increase as companies hold greater amounts of debt to discourage excessive risk. Clinton’s campaign estimates that banks and other institutions would pay an annual charge of “multiple billions of dollars,” according to a summary provided by the campaign.
A separate tax would be levied on high-frequency trading, targeting trading strategies that involve significant numbers of order cancellations, a practice her campaign said makes markets “less stable and less fair.”
“There are risks in our financial system that could still cause another crisis,” Clinton wrote in an op-ed published in Bloomberg View. “To prevent irresponsible behavior on Wall Street from ever again devastating Main Street, we need more accountability, tougher rules and stronger enforcement.”
Liberal Democrats have spent months calling on Clinton to take a more aggressive approach to regulating Wall Street. In recent weeks, Vermont Sen. Bernie Sanders has gained ground against her in early primary states with a populist economic message that vows to take on the “billionaires.”
“Given the image of big banks today, it is easy now to take on Wall Street. I was there when it was not so popular,” Sanders said, in a statement.
Clinton’s close ties to Wall Street and the centrist economic policies of the administration of her husband, former President Bill Clinton, make some in her party skeptical of her populist credentials. Both Clintons have earned millions in speaking fees, including some from Wall Street banks, and daughter Chelsea and her husband have worked at hedge funds.
About a dozen of Clinton’s top campaign bundlers — donors who have raised at least $100,000 for her presidential bid — work in finance and investing. In July, a day after proposing higher capital gains taxes on short-term investors, Clinton raised at least $450,000 Tuesday night at the Chicago home of Raj Fernando, a longtime donor. His firm, Chopper Trading, specializes in high-frequency transactions and was recently purchased by Chicago-based competitor DRW.
Her new plan may not go far enough for elements of her party’s base, who would like to see the revival of a Depression-era law banning financial institutions from combining their commercial banking operations with riskier investment banking. Two of her rivals, Sanders and former Maryland Gov. Martin O’Malley, say they’d like to see the law, called Glass-Steagall, restored. It was repealed during the administration of Clinton’s husband.
“I certainly share the goal of never having to bail out the big banks again, but I prefer the path of tackling the most dangerous risks in a different way,” she wrote.
In the first major economic speech of her presidential campaign, last July in New York City, Clinton expressed outrage at accounts of money laundering and currency manipulation involving several major financial firms. She said few rogue traders had faced consequences for malfeasance, a subtle swipe at the Obama administration, which took no action against the individual financial titans who pursued risky fiscal practices.
“This is wrong, and on my watch it will change,” she said.
Under her new plan, individual investors, financial managers and traders would face the possibility of tougher criminal penalties. They also would be banned from future employment in the financial industry and could find their compensation penalized as part of a government settlement.
Her plan would extend the statute of limitations on major financial fraud cases to allow prosecutors more time to develop a case. She would also increase federal funding for financial regulators including the Securities and Exchange Commission, Consumer Financial Protection Bureau and Commodity Futures Trading Commission, and raise the maximum fines those agencies can levy.
She also proposes limiting the use of pacts, known as deferred prosecution agreements, where the Justice Department agrees not to press criminal charges if a settlement is reached.