FINANCIAL REFORM
PROTECTING THE AMERICAN DREAM FROM ANOTHER WALL STREET CRASH
Governor O’Malley knows that the American Dream today remains out of reach for too many families. To attack this problem, it will take a multi-pronged and fearlessly progressive approach to addressing economic inequality. But the results of any steps we take as a nation to raise wages, ensure retirement security, and make the dream of homeownership a reality can be wiped out in an instant by another Wall Street crash.
We need to protect America’s economy. And we can only do it by implementing strong accountability and structural reforms that build upon the Dodd-Frank Act and put an end to too-big-to-fail, too-big-to-manage, and too-big-to-jail financial firms.
BRINGING REAL ENFORCEMENT TO WALL STREET—FINALLY
In April, former Fed Chair Paul Volcker wrote: “it is all too clear that the federal financial regulatory structure is simply inadequate to head off future crises. The structure that failed us in anticipating and responding to the emergency is largely still in place.”
He is right. While the Dodd-Frank Act made important strides forward in reforming the financial industry, there is still much work to be done—both in terms of structural AND accountability reforms.
As President, Governor O’Malley will change the culture of our regulatory and oversight agencies and departments by immediately pursuing the following reforms to ensure that Wall Street megabanks don’t get to play by their own set of rules. He will provide real deterrents to recidivist behavior among the worst actors on Wall Street.
PROPOSAL: FINANCIAL REGULATORS MUST ACTUALLY BE INDEPENDENT
Today, there is a constantly spinning revolving door among both senior and mid-level regulators and the prosecutors responsible for reining in Wall Street. Senior officials at the Department of Justice, Securities and Exchange Commission, Treasury and other key departments have been deeply entrenched in the industries they are supposed to regulate, and often return to them after they leave government. This practice undermines their independence and public trust in the federal government’s role of independent arbiter.
Governor O’Malley will:
Ensure Key Political Appointees Are Independent of Wall Street
Over the last seven years, both the SEC and DOJ have fallen down on the job of enforcement—sending a message to Wall Street that they are “too big to jail.” The most impactful step we can take toward stronger enforcement against Wall Street is appointing people to key positions who will take financial regulation seriously. >>>
PROPOSAL: PUT MORE COPS ON THE WALL STREET BEAT
Even as the need for oversight has increased, funding for and prioritization of critical enforcement agencies has lagged. Today, the CFTC’s staff is virtually unchanged from the 1990’s, despite the fact that their area of oversight—commodity futures trading—has exploded in size, and that they are now responsible for regulating over-the-counter derivatives. Given the financial industry’s focus on weakening derivatives regulation, this lack of funding can be seen as a backdoor attempt to water down Dodd-Frank.
Similarly, the SEC’s regulatory role has grown dramatically, while the agency has also been given additional responsibilities under Dodd-Frank. But the agency has been chronically underfunded by Republicans in Congress – who propose hundreds of millions of dollars in cuts to the agency every year – and lacks the resources to adequately enforce laws on behalf of investors.
Immediately Double Funding for CFTC and SEC
PROPOSAL: ENFORCE REAL PENALTIES FOR FINANCIAL CRIMES
Since the financial crash, the federal government’s key enforcement agencies have sent a message to the largest financial institutions that they are “too big to jail” and somehow above the laws that apply to every other entity and individual in America.
Rather than enforcing penalties that would have real deterrent effects, enforcement agencies have relied almost exclusively on settlements as a punitive measure. As a result, banks like JP Morgan Chase, Citigroup, Barclays, UBS, and the Royal Bank of Scotland have continued to break the law, because they know that they will face nothing more than a slap on the wrist—a fine paid with shareholder money that can often be deducted from their taxes as a business expense. >>>
BREAKING UP THE TOO-BIG-TO-FAIL, TOO-BIG-TO-MANAGE, TOO-BIG-TO-JAIL FIRMS BEFORE THEY BREAK US
While the vast majority of our financial system works quite well, a handful of too-big-to-fail, too-big-to-manage, and too-big-to-jail megabanks continue to pose an enormous risks: to our financial system, the economy, and American families.
As President, Governor O’Malley will work tirelessly to eliminate the unique danger posed by too-big-to-fail banks, by making the following structural reforms.
PROPOSAL: BREAK UP THE BIGGEST BANKS
Separate Risky Investment Banking from Ordinary Commercial Banking
Require Law-Breaking Banks and their Executives to Admit Guilt, Face Real Consequences
For 70 years, the 1933 Glass-Steagall Act kept the U.S. economy safe from major financial crises by requiring commercial banks to be separate from investment banks to prevent them from putting everyday Americans’ deposits at risk. If Glass-Steagall hadn’t been repealed in 1999, the financial crisis will likely have been far less severe.
Governor O’Malley will:
Immediately Reinstate Glass-Steagall. The Volcker Rule, sometimes referred to as “Glass-Steagall Lite,” is excessively complex, providing too many opportunities for banks to exploit loopholes and ambiguities. O’Malley will introduce legislation to once again separate traditional banks from riskier financial services, while updating protections to account for new banking activities and prevent the new rules from being watered down. This will be one of his top priorities.
End “Too Big to Fail”
PROPOSAL: LIMIT RISKY, SPECULATIVE TRADING ON WALL STREET
Implement a Financial Transaction Tax to Limit High-Frequency Trading
High-frequency trading creates volatility and unnecessary risk in financial markets, while serving no productive purpose in the real economy. A small tax should be applied to each sale and purchase of a financial instrument to limit this activity—one that would be nearly imperceptible to longer-term investors, but could dramatically cut down on highrisk, speculative activity on Wall Street.
Governor O’Malley will:
Implement a financial transaction tax. The tax will be well-designed not to soak financial traders, but to fix bad incentives for speculation that comes at the cost of real job-creating investment.
PROPOSAL: PUT CONSUMERS’ INTERESTS FIRST
Require Loan Brokers to Act in Consumers’ Best Interests
Read the fully annotated PDF on Governor O’Malley’s plan for Financial Reform.
https://martinomalley.com/policy/financial-reform/?source=stw-ahe&ms=stw-ahe