The Facts: Clinton Has The Toughest Plan To Take On Wall Street And The Financial Industry

Hillary Clinton has long stood up to Wall Street – going back to her time as New York Senator, when she warned against abuses nearly a year before the crisis hit. While Senator Sanders pushes proposals scrutinized as unachievable and lacking detail beyond a slogan, Clinton has the strongest, most comprehensive plan to tackle risks on Wall Street and in the financial sector. As president, she would:

  • Defend Dodd-Frank against Republican attacks.
  • Impose a risk fee on the largest financial institutions and a tax on high-frequency trading.
  • Require firms that are too risky to manage to reorganize or even break apart.
  • Strengthen the Volcker Rule.
  • Strengthen oversight of the “shadow banking” system to reduce risk.
  • Hold individuals, not just corporations, accountable when they break the law, including through criminal prosecution.
  • Ensure that the financial sector serves the interests of investors and consumers, not just itself.
  • Slow the revolving door between the financial industry and government financial regulators.

Tackling these issues isn’t new for Hillary Clinton. She has a long record of fighting for Main Street over Wall Street:

  • In 2007, nearly a year before the crisis, she went to Wall Street to call directly for a moratorium of home foreclosures, to freeze adjustable loan rates, and to require accountability on Wall Street.
  • In March 2008, she called for new action to help millions of at-risk homeowners restructure their mortgages and a new housing stimulus package to fight concentrated foreclosures.
  • In 2007, she called for ending the carried interest loophole, which allows some wealthy investors to pay lower tax rates on their income than average Americans.
  • In 2008, she introduced legislation to cap the amount top executives could earn tax-free through deferred compensation, require top executives to return large performance-based pay packages if financial irregularities were discovered, and give shareholders a vote on executives’ pay packages.
  • In 2008, before the crisis, she pledged to create a CFPB-like “Financial Product Safety Commission to crack down on abusive and predatory lenders and to protect consumers who use credit cards, car loans, home mortgages, and other financial products.” According to the Daily Beast, she put the idea for this kind of agency “at the heart” of her “Fair Credit for Families Agenda” -- and the “idea eventually was rebranded” as the Consumer Financial Protection Bureau.

Progressives, analysts and reformers have praised her broad approach to tackling risk in our financial system while protecting financial reforms from Republican attack:

  • Paul Krugman: “Hillary Clinton and Bernie Sanders had an argument about financial regulation during Tuesday’s debate — but it wasn’t about whether to crack down on banks. Instead, it was about whose plan was tougher. . . . For what it’s worth, Mrs. Clinton had the better case.”
  • New York City Mayor Bill de Blasio: “Having studied all the Wall Street reform proposals, I firmly believe Hillary Clinton has put forward the toughest, farthest-reaching plan of anyone running for President. She would not only go beyond Dodd-Frank to ensure the needed authority exists to break up or downsize banks that are too large, but she also imposes new constraints on activities in the shadow banking sector, which is too often overlooked. Hillary Clinton’s plan confronts risk-taking wherever it occurs, from investment and commercial banks to insurance firms to hedge funds. Her plan goes the farthest to crack down on the true causes of the last financial crisis, and to prevent the next one.”
  • Former Congressman Barney Frank, author of the Dodd-Frank financial reform law, on Clinton’s high-frequency trading tax: “I think it’s a good idea.”
  • Ohio Sen. Sherrod Brown, ranking member of the Senate Banking Committee: “The things she does will contribute to safety and soundness, will make Wall Street more trustable by the public. All the things that we need out of Wall Street, it does.”
  • Vox’s Matt Yglesias: “Hillary Clinton has often stood accused of pandering or shaping policy proposals for political purposes, but her proposals for improving regulation of the financial system show her doing exactly the opposite — tackling the issue of mega-bank risk in a thoughtful way that is likely to prove politically thankless.”
  • Ezra Klein: “This is a very good financial reform plan form [sic] Hillary Clinton”
  • Politico’s Mike Grunwald: “Hillary’s ‘risk fee’ is so much smarter than an arbitrary cap on bigness. And this focuses on the right risks.”
  • Roosevelt Institute’s Mike Konczal: “Clinton’s agenda is a very detailed and comprehensive dive into financial reform. It is broad, covering parts of the financial markets that aren’t often discussed. If anything, it goes into such footnoted specifics that it can be overly wonky.”
  • Roosevelt Institute CEO Felicia Wong: “Secretary Clinton released a detailed and comprehensive agenda today and her proposals to strengthen Dodd-Frank and the Volcker rule, step up enforcement, and increase rules around shadow banking and high-frequency trading demonstrate a thoughtful and serious approach to these issues.”
  • MSNBC: Clinton unveils a plan that Wall Street won’t like.
  • Washington Post’s Catherine Rampell: “[O]versimplified calls to ‘bring back Glass-Steagall’ have diverted attention from the most promising Wall Street reform proposals — including some tough-minded ideas from Hillary Clinton, so often accused of being a Wall Street toady… Her proposals are not terribly sound-bite-friendly, as is often the case with careful financial regulations. That’s probably why they don’t get as much airtime as catchy, alliterative calls to ‘break up the banks.’ Other presidential hopefuls nonetheless would do well to study them — and abandon their obsession with a dated law that has little bearing on today’s financial system.”
  • Brandon Garrett, University of Virginia law professor and authors of Too Big to Jail: “Clinton has proposed for the first time a top-to-bottom plan for policing and preventing corporate crime and financial misconduct. We have not seen the likes of it in this campaign or elsewhere. . . . While there have been critics of [the lack of corporate accountability] on both sides of the aisle, some good proposals for legislation, concerns raised by judges, and saber-rattling statements from the Department of Justice, what we have not seen is a plan for action that fundamentally rethinks how financial offenses are handled.

And Senator Sanders’ prescription for financial reform is coming under scrutiny for making unrealistic promises and lacking sufficient detail:

  • Paul Krugman: “Sanders has made restoring Glass-Steagall and breaking up the big banks the be-all and end-all of his program. That sounds good, but it’s nowhere near solving the real problems. The core of what went wrong in 2008 was the rise of shadow banking; too big to fail was at best marginal, and as Mike Konczal notes, pushing the big banks out of shadow banking, on its own, could make the problem worse by causing the risky stuff to ‘migrate elsewhere, often to places where there is less regulatory infrastructure.’”
  • Vox’s Matt Yglesias: “Sanders’s Wall Street plan is a slogan… ‘A bank that’s too big to fail is too big to exist’ is a great line for a stump speech or a television appearance. But it’s not even the beginning of an actual agenda on bank regulation.”
  • Jonathan Chait: “The Dodd-Frank reforms of the financial industry may not have broken up the big banks, but they have, at the very least, deeply reduced systemic risk. The penalties for being too big to fail exceed the benefits, and, as a result, banks are actually breaking themselves up to avoid being large enough to be regulated as systemic risks… Sanders’s ideas should not be waved through as a more honest or uncorrupted version of the liberal catechism. The despairing vision he paints of contemporary America is oversimplified.”
  • Wall Street Journal: “Mr. Sanders also didn’t make clear how he would deal with risky activities at so-called shadow banks that aren’t very large”
  • Barney Frank, via Washington Post: “In an interview, [former House Financial Services Committee Chair Barney] Frank said that Sanders’s focus on breaking up the big banks amount to ‘one size fits all’ and could be destabilizing to the economy.”
  • Kevin Drum, Mother Jones: “Bring back Glass-Steagall! This is a popular cry… but it’s probably not a very good idea on the merits.”
  • CNN: “Sanders has backtracked on the role shadow banks played in the 2008 crash”
  • Quartz: Bernie Sanders says he can break up the banks in a year.Is that even possible? Probably Not.
  • Forbes: Why The Bernie Sanders #BreakEmUp Campaign Amounts To An Empty Promise
  • Fortune: Bernie Sanders Is Taking a Page from Donald Trump's Playbook: Here’s why Sanders’ latest Wall Street reform plan is unrealistic
  • Slate: “Sanders’ promise to start smashing heads on Wall Street rings a bit hollow.”