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Elizabeth Warren and Bernie Sanders lay it out as a top priority: In their view, the American financial system has devolved into a disaster for the vast majority of those in the country’s working and middle classes, and if we want to reduce wealth and income inequality between them and the super-rich, we first have to shake up Wall Street.
Between the two of them, Warren and Sanders would hold private equity firms accountable for their bad bets and drastically reduce the fees they charge their customers. They would separate commercial from investment banking, cap credit card interest rates, tax financial transactions, and clamp down on stock buybacks. Their regulatory legislation would cut big banks and CEO salaries down to size, eliminate student debt, and protect low-income borrowers from predatory payday loans.
From there, the Democratic centrist candidates offer widely differing options:
Former Vice President Joe Biden aggressively declares, “This country wasn’t built by Wall Street bankers and CEOs and hedge fund managers.” He calls for a “transformational investment” of $1.3 trillion in infrastructure to rebuild the middle class, to be financed “by making sure the super-wealthy and corporations pay their fair share, by reversing President Trump’s corporate tax cuts and “closing other loopholes in our tax code that reward wealth, not work.”
Biden has collected $975,974 in campaign contributions from the securities and investment industry, according to the Center for Responsive Politics, an independent research organization in Washington, D.C., which tracks money in politics and its influence on public policy. Biden’s largest Wall Street donors have been employees, owners, and others of Morgan Stanley ($47,636), Wells Fargo ($46,891), the Blackstone Group ($42,435), and JPMorgan Chase & Co. ($34,725).
Former South Bend Mayor Pete Buttigieg’s position papers lament how working families’ incomes “have stagnated almost my entire life” while “most of our economic growth goes to a smaller and smaller slice of the wealthiest Americans.” His economic plan seeks to “rebalance power toward workers,” in part by promoting unionization efforts. “I won’t measure success by the heights of the Dow Jones, I will measure it by how much a worker has in her pocket,” he said in a Jan. 10 tweet.
Buttigieg has called for a financial transactions tax, as well as a higher capital gains tax. He has also raised $968,884 from securities-and-investments sources. Personnel from the Wells Fargo ($60,840) and the Blackstone Group ($48,299) are his top Wall Street backers.
Michael Bloomberg’s self-financing campaign promises to “work to strengthen the middle class”—with no hint or suggestion that his home turf might have played a role in increasing the wealth gap between most of the country and the few at the top.
Speaking at a 2014 Securities Industry and Financial Markets Association conference, the former New York City mayor expressed distaste for bills that would regulate big banks, such as those covered by the Dodd-Frank reform legislation passed in 2010, calling them “stupid laws” that can be “really dysfunctional.”
“If [banks] can’t make the money they did,” Bloomberg told the conference, according to CNNMoney, “they can’t provide the financing that this country and this world needs to create jobs and build infrastructure.”
Minnesota Sen. Amy Klobuchar, in an op-ed for her home state’s Duluth News Tribune two years after the 2008 financial crisis, criticized Wall Street for delivering bonuses worth $146 billion to executives at its top firms when national per capita income had declined. She blasted the big Wall Street firms for making “unconscionable bets” that they hid from market regulators that “threatened” the stability of the U.S. economy when they lost.
Klobuchar, with $526,377 coming into her campaign committee from security-and-investment sources, has received $31,048 from contributors related to Wells Fargo, $29,500 from Goldman Sachs, and $26,979 from JPMorgan Chase.
“It’s about allocating capital”
For all the complexity that comes with trying to understand what a derivative is, or how hedge funds work, getting a grasp on Big Finance and controlling its speculative side comes down to a fairly simple analysis, according to at least one financial expert and advocate for Wall Street reform.
“It’s about allocating capital,” said Dean Baker, senior economist and cofounder of the Center for Economic and Policy Research, a Washington group that analyzes political and economic issues from a progressive perspective. “If I want to save money for my retirement or start a business or buy a house or whatever, it’s about connecting people from A to B. From that vantage point, what we really want is a small financial sector.”
Dean Baker, Center for Economic and Policy Research
“It has roughly quintupled relative to the size of the economy since the 1970s, and what are we getting for that?”
Instead, Baker continued, “What we’ve seen has been a massive explosion of the sector. It has roughly quintupled relative to the size of the economy since the 1970s, and what are we getting for that? I don’t think that anyone can say with a straight face that we’re getting better served in the sense that capital is somehow being better allocated, or that we’re more secure in our savings.”
Reining in Wall Street, then, entails “trying to restore the financial sector to its proper role in the economy,” Baker said, which “means having banks we can put our money in and be confident that it’s secure.” Baker also said a proper regulatory apparatus would make sure that nobody manipulates financial markets and that qualified small-business entrepreneurs would have access to capital.
At least in the early primary states, voters seem to be thinking that the government needs to exert more, rather than less, regulatory muscle on Wall Street titans and their celebrated CEOs, whose 2017 incomes reflect the wealth disparity that benefits the top 0.1 percent. These include Jamie Dimon, JPMorgan Chase, $29.5 million; James Gorman, Morgan Stanley, $27.1 million; Lloyd Blankfein, Goldman Sachs, $24 million; and Brian Moynihan, Bank of America Merrill Lynch, $23 million. A survey, conducted by Celinda Lake of Lake Research Partners, showed that 69% overall of the electorate in Iowa, New Hampshire, South Carolina, and Nevada want tighter controls on the financial sector, with strong majorities expressing support among Republicans as well as Democrats.
Taking on Wall Street requires a wide variety of policy prescriptions. Preserving the Dodd-Frank Act would sit near the top of the list–especially the act’s Volcker Rule, which seeks to limit speculative bank investments. Also crucial are the legislation’s requirements that banks that are “too big to fail” be able to cover their losses on their own, instead of seeking government bailouts. The strategies extend to strengthening agencies such as the Consumer Financial Protection Bureau, which guard against predatory lending practices, and entail grappling with private equity funds whose CEOs pay themselves tens of millions of dollars while they ransack troubled corporations and leave them as ghostly remnants of their former selves.
“Regulation of Wall Street is a very, very high priority if we care about things like wealth and equality and treating consumers the way they ought to be treated,” said Carter Dougherty, communications director for Americans for Financial Reform, a coalition of 200 labor, consumer, and civil rights groups formed after the 2008 financial meltdown. The coalition co-commissioned the early-states poll with the Center for Responsible Lending, which monitors the financial marketplace on behalf of underserved borrowers nationwide.
“Wall Street is pretty core to how the economy works, and as of late that has not been working well for ordinary people,” Dougherty added. “The problem is not only that people on Wall Street get rich, but that they make things work badly for other people. The key to reform here is reducing the power and profiteering of Wall Street.”
Celinda Lake, who conducted the poll, thinks Wall Street will resonate as a big issue with the American public. Not everyone agrees, however.
Paul Maslin, Democratic pollster
“But how far are they willing to go for remedies is my next question, and I think there would be some limit to that.”
Paul Maslin of the Democratic polling firm of Fairbank, Maslin, Maullin, Metz & Associates, which has been retained by the Bloomberg campaign, said that among Democrats, ramping up Wall Street scrutiny ranks as “a second-tier concern” compared to healthcare, climate change, immigration, and defeating Trump. (Maslin himself is not involved in Bloomberg’s campaign.)
“The fact that the two progressives [Warren and Sanders] combined can’t rack more than 35 or 40% tells you that there’s certainly a significant disparity–or at least some disagreement among Democrats about how far to go,” Maslin said. “Do Democratic voters generally have a positive view of Wall Street? No. Do they have a positive view about corporate money in politics? No. But how far are they willing to go for remedies is my next question, and I think there would be some limit to that.”
Rather than targeting Big Finance, Maslin said there might be a greater groundswell of discontent among voters when it comes to the concentration of wealth and the impact of Big Tech on them and their communities in the way they communicate, consume news, and simply buy things.
Tough talk, but not many specifics
In the end, whoever becomes the Democrats’ candidate may determine just how large Wall Street reform figures in the campaign for the White House–especially if neither Sanders nor Warren captures their party’s nomination. (None of the campaigns contacted for this story responded to queries about the details of their candidates’ positions on finance reform.)
Among the leading moderate Democratic candidates, Joe Biden has drawn criticism from progressives for supporting, when he was a U.S. senator from Delaware, a bill backed by the banking industry and signed into law that made it tougher for people to obtain bankruptcy protection. Biden, however, later established some pro-consumer credentials as vice president when he chaired the Middle Class Task Force under President Barack Obama and supported major financial reform legislation, such as the Dodd-Frank Act, which created the Consumer Financial Protection Bureau. Last September the Washington Post reported that Biden’s advisers are weighing the financial transactions tax–a key element in progressive platforms to impose a fee on stock trades.
The Center for Economic and Policy Research’s Baker views Biden, who, in national polls, remains his party’s frontrunner, “as sort of a guy who would be on the fence on this, but I doubt that he has any strong views like, ‘When I get there I want to rein in Wall Street.'” Nor does Baker see Buttigieg as eager to confront Wall Street, and says of Bloomberg, whose net worth is more than $60 billion, “I don’t think he’s going to have any interest in reining in Wall Street.”
As a presidential candidate, Amy Klobuchar hasn’t been nearly as harsh on Wall Street as she was in 2010, when she strongly supported Dodd-Frank. She barely mentions the financial system on her campaign website, although on her U.S. Senate site she talks about “putting Main Street ahead of Wall Street” with the Dodd-Frank reforms “to make sure that taxpayers are never again on the hook for bad bets on Wall Street.”
One reason she’s gone quiet as a candidate on the subject may be that “it’s not a priority for voters, and all the candidates are going where the voters are,” said Prof. Larry Jacobs, the director of the Center for the Study of Politics and Governance at the University of Minnesota’s Hubert H. Humphrey School of Public Affairs. Still, when Republicans pushed through a measure to water down Dodd-Frank in 2018 with the support of 16 Senate Democrats, Klobuchar voted against it, even though the regulations had forced a number of banks in her home state to go out of business due to the law’s original higher capital requirements.
“Klobuchar is very sensitive to constituent complaints,” Jacobs said, adding, “so, yes, I think that was a tougher vote for her” and that her opposition to the rollback “is a tell” about where her heart is when it comes to assessing Wall Street.
Whoever wins the nomination, of course, will be matched up against an incumbent president in Donald J. Trump, who talked tough on Wall Street in his 2016 campaign, claiming that “these hedge-fund guys are getting away with murder.” Then, once elected, he appointed one of them, Steven Mnuchin, as his Treasury secretary, and pushed through corporate tax cuts that led to record bank profits of $236.7 billion last year, before he signed the legislation that weakened regulations that Dodd-Frank imposed on big banks.
“People think he talked a good game about draining the swamp, and they thought that he was an outsider and change-oriented,” said Celinda Lake. “Then [his] policies started to catch up with him.”