Here's Hillary Clinton's plan to take on Wall Street
The former secretary of state proposed a number of left and center-left proposals to eliminate risk and heavily punish individuals and corporations that commit financial crimes.
Much of Clinton's plan involves enforcing existing laws like the landmark 2009 Dodd-Frank Act, rather than completely overhauling the financial system. But her plan suggests that further proposed regulations and rules may be necessary during Clinton's theoretical presidency.
"The bottom line is that we can never allow what happened in 2008 to happen again," she wrote in a Bloomberg op-ed. "Just as important, we have to encourage Wall Street to live up to its proper role in our economy - helping Main Street grow and prosper."
Here are the main points of Clinton's plan:
- Support the Dodd-Frank Act. Clinton said she would veto "any legislation that attempts to weaken the law and would fully enforce its protections." Dodd-Frank enacted significant changes to existing regulation on the financial industry and established the Consumer Financial Protection Bureau, an agency designed to investigate the finance and banking industries for potential abuses.
- Eliminate tax loopholes. Clinton's plan would eliminate the so-called carried interest tax loophole, which allows hedge fund and other wealth managers to pay lower taxes on their primary sources of income. This idea has become somewhat popular in both parties, with candidates like Clinton and even Republican front-runner Donald Trump suggesting that investors are not paying their fair share in taxes.
- Charge banks a "risk fee." For banks with more than $50 billion in assets, Clinton suggested a "risk fee" that would scale up as banks take on bigger, shorter-term debts. Clinton said this will discourage banks from making risky financial moves that result in huge gains or losses.
- Impose regulations on "shadow banks." Clinton's proposal included regulations on some hedge funds, private-equity firms, and non-bank lenders, though Clinton did not specify what those regulations would look like.
- Enact a "high-frequency trading" tax. The plan included a tax on high-frequency trading, which Clinton said contributes to market volatility.
- Close the "Volcker Rule" loophole. The plan would bar taxpayer-backed banks from investing in hedge funds involved in speculative trading.
- Limit agreements between prosecutors and financial industry actors when crimes occur. Clinton said prosecutors too often reach compromises with individuals and corporations accused of crimes that allow these actors to go unpunished in exchange for cooperation with government regulators. Her plan would create specific guidelines for when it is acceptable for the federal government to defer prosecution in exchange for compliance from those accused of committing crimes.
- Increase funding for federal prosecutors. Clinton said her budget proposals would include increased funding for the Department of Justice, Securities and Exchange Commission, and the Commodity Futures Trading Commission.
Clinton's plan comes as she faces increasing pressure from the populist wing of the Democratic party to take more aggressive action to regulate powerful financial actors, who many on the left have long complained went unpunished for the 2008 financial crisis.
The plan specifically stated that a Clinton administration would enforce a provision of Dodd-Frank that bars leaders of financial institutions that suffer crippling losses from accepting large bonuses. The plan would also force leaders of financial institutions to resign if "egregious misconduct" occurred.
Still, the plan positions the former secretary of state slightly to the right of her Democratic competitors.
Both Sen. Bernie Sanders (I-Vermont) and former Maryland Gov. Martin O'Malley (D) have proposed legislation similar to the Glass-Steagall Act, which keeps investment banks and commercial banks separate.
O'Malley, in particular, has been critical of Clinton's ties with the financial industry, which he has claimed could hinder proposed regulations once Clinton is in office.
"My proposals go a lot further than Secretary Clinton's," O'Malley said earlier this year. "Her closeness with big banks on Wall Street is sincere, its heartfelt, long-established and well-known. I don't have those ties. I am independent of those big banks on Wall Street."