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July 29, 2016

Financial Reform Newsletter: Hillary Clinton's war on Wall Street and more…

Hillary Clinton’s War on Wall Street: At least once a week since the campaign started, Better Markets has been asked about Hillary Clinton and Wall Street, with most questions having the premise that she is in their pocket and will, if elected, be at their beck and call.  This reached a fevered pitch last week as the Democratic Convention was about to get underway, which caused Better Markets CEO Dennis Kelleher to take a hard look at her position papers, actions, and the Democratic platform. 
The facts, however, suggest just the opposite of what the inquiries presumed, as Dennis detailed in an Op Ed in Politico
“Based on a thorough review of her platform, Clinton has offered a number of comprehensive, concrete ideas to re-regulate the financial industry, including going after Wall Street’s too-big-to-fail firms and their most predatory, dangerous, high risk and profitable activities.  Her platform represents one of the most progressive financial regulatory plans in presidential history.”
To us, it was telling that Clinton was not just going after nonbanks in the shadow banking system, but was also going directly after Wall Street’s biggest and most dangerous too-big-to-fail banks: JP Morgan Chase, Goldman Sachs, Bank of America and Citigroup.  By controlling more than 90% of the $200 trillion-plus U.S. derivatives markets, they also happen to be the leaders of the derivatives dealers’ club, which is specifically targeted for the heaviest regulation by Clinton. 
It was important to note that Clinton has also recently publicly stood up to Wall Street’s most powerful firms on several key issues.  While fighting off special interest policy riders in the annual appropriations process has received the most attention, Clinton also unequivocally and repeatedly defended the Department of Labor’s new fiduciary duty rule, which the financial industry spent years and tens of millions of dollars trying to defeat.  She didn’t have to do that; after all, who would say a presidential candidate should take a position on a departmental rule?
One additional, very important point:  Wall Street’s too-big-to-fail firms (and their purchased mouthpieces and allies) love to falsely and misleadingly call any regulation of finance “bank bashing,” but nothing could be further from the truth, as Dennis pointed out:
“There are more than 6,000 banks in U.S., but less than 30 with more than $100 billion in assets. Thus, the vast majority of U.S. banks and bankers serve their communities, provide customers with essential banking services and pose little systemic risk. However, it is these 30 banks and roughly an equal number of nonbank financial firms that are too-big-to-fail and pose a unique threat to our financial system, our economy and our standard of living.”
“Eliminating or reducing those risks is what financial reform is all about and Clinton’s plan will help do just that. That’s not bank bashing; that’s sensible regulation that creates a level playing field, competition, growth, jobs, capital formation, lending and rising standards of living. In short, a financial system that supports the real economy and works for all Americans.”

Donald Trump has Moved From the Apprentice to Extreme Makeover with a Bait-and-Switch Platform that Deregulates Wall Street While He Poses as a Reformer: Trump’s campaign seems to not only be fact and policy-free, but little more than slogans and political stunts, including when it comes to protecting – or in his case, notprotecting — Main Street from Wall Street. 
On the campaign trail, Donald Trump has made no secret of his intention to dismantle the Dodd-Frank Act should he make it to the White House.  That’s why it was initially a surprise that the GOP platform included a plank calling for the reinstatement of the Glass- Steagall Act.  But then the campaign manager, Paul Manafort, let the truth slip out:  he “mentioned the return of Glass-Steagall specifically as cudgel against Hillary Clinton.” 
Thus, the Republican Platform is nothing more than a bait-and-switch political stunt carefully crafted to deceive the American people.  The claim to restore the Glass Steagall law is the bait, but the deregulation of Wall Street by gutting the Dodd Frank law is the switch that will lead to another financial crash and cost tens of millions of American families their jobs, homes and savings.  
It is just a ploy to try to make people think that there’s a simple, magic solution to the threat posed by Wall Street’s too-big-to-fail banks and nonbanks.  We wish there was, but no one law or rule will protect Main Street from Wall Street’s complex global banking giants.  They simply must be comprehensively regulated or they will do again to America what they did in 2008: cause an historic financial crash, receive massive bailouts and destroy America’s economy.
A Glass Steagall law will only impact a few banks while gutting the broad Dodd-Frank law will deregulate many of the most dangerous too-big-to-fail financial titans.  This would be huge mistake, like getting rid of seat belts, air bags and bumpers on a car and replacing them with a prayer book.  It’s not either/or; it’s both:  fully enact Dodd-Frank and impose Glass Steagall.  Comprehensive regulation of the uniquely dangerous threat posed by Wall Street’s too-big-to-fail banks and nonbanks is the only way to genuinely protect the American people.

Fighting the Rule “Whoever has the Gold Makes the Rules”: Most people know the perversion of the Golden Rule that says, too often accurately, “whoever has the gold makes the rules.”  At Better Markets we prefer to think that making the rules determines who gets the gold.  That’s why the rule making process and inevitable legal fights that stem from it are so important: it’s all about who gets the gold.
To that end, it has been a busy time at Better Markets because we have been hard at work on a number of really important comment letters and legal briefs.  For example, over the last several week, we have filed on: executive compensation, the consolidated audit trailclearing requirements for interest rate swapsposition limits for derivatives, and new disclosure requirements.
While not exactly page-turning stuff, all of these rules play an important part in guiding how the financial markets operate and ultimately impact the economic safety, prosperity, and opportunity of every American.  And, the fifth item above is particularly important as it seeks to reduce the amount of information disclosed to investors, which will limit everyone’s ability to make informed investment decision and know what is going on in corporate America.
   Even more troubling is that for some unknown reason, the Securities and Exchange Commission (SEC) took it upon itself to initiate and prioritize a major project seemingly designed to reduce information available to the markets.  As detailed in Better Markets’ comment letter, contrary to SEC Chair Mary Jo White’s claims and testimony, Congress did not require the SEC to undertake this project. Given that there is no basis for this resource intensive initiative, we have demanded that the SEC withdraw its proposal and refocus on what are supposed to be the SEC’s priorities: protecting investors, markets and capital formation. 
We have discussed the Department of Labor’s clients’ best interest fiduciary duty rule many times before – what it does, why it is so important, and how the industry has fought it so hard.  But it boils down to one very simple, very important idea:  The rule protects the American peoples’ retirement funds from advisers who put their own self-interest above their clients’.  That’s wrong.  The rule prohibits that and requires that the clients’ best interest must be first and foremost.
As is well known, finalizing a rule doesn’t end the fight.  Too often, the industry files lawsuits to overturn the rules or, at a minimum, get a substantial delay in its implementation.  Thus, it was no surprise that the industry sued over the DOL rule, seeking to continue to put their own profits ahead of a safe and secure retirement for all Americans.  So in addition to the many comment letters Better Markets has recently filed, it also filed an amicus brief in support of the Department of Labor conflict of interest rule and opposing the industry’s latest efforts to kill it. 


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