Financial reform issues are a major concern for voters following the 2008 financial crash and the more than $20 trillion in economic wreckage it caused for families from coast the coast. Although some Presidential contenders are talking about financial reform and the threats posed by Wall Street’s too-big-to-fail banks, voters deserve to hear from all candidates on their plans to rein in Wall Street, so the American people can hold them accountable once in office.
This week’s CNBC Republican presidential debate is the latest opportunity for voters to hear from the candidates. It’s important that they’re asked about their plans so voters can get the information they expect and deserve. Here’s five of the most important questions that they should be asked:
Do you support reinstating a Glass-Steagall-like law to protect America’s hardworking families and take them off the hook for future bailouts?
The Glass-Steagall Act was the key structural legal protection enacted after the Great Crash of 1929 and the Great Depression of the 1930s. It prohibited the same bank from engaging in both relatively low-risk traditional lending and banking (like savings accounts, mortgages and business loans, backed by FDIC insurance and access to the Federal Reserve Bank) and higher-risk investment banking (like trading, derivatives and securities activities). For more than 60 years, the Glass-Steagall Act kept those activities separate and, during that time, the U.S. had the highest rate of economic growth in its history while the financial system avoided catastrophic crashes.
But this law was repealed with the passage of the Gramm-Leach-Bliley Act in 1999, part of a larger, successful push by Wall Street and its allies to dismantle many of the safeguards put in place to protect the American people after the Great Depression. Repealing this law unleashed an unprecedented acquisition spree that made the biggest banks much bigger, more complex, more interconnected and much more dangerous to the country. While there’s no silver bullet that will entirely protect Americans’ jobs, homes and savings from another devastating financial crash, this type of structural change would help to protect the American people and prevent their tax dollars from being used to bail out Wall Street’s riskiest too-big-to-fail megabanks. Gov. Mike Huckabee has already said he supports reinstating this law, and it’s time for all candidates to take a stand.
Do you support the Department of Labor’s best interest rule to protect Americans’ retirement security?
The U.S. is facing a retirement crisis: too few people are saving for retirement and too many of those that do aren’t saving enough to live independently and comfortably in retirement. Those trying to save for retirement often turn to brokers and other advisers to help them make the complicated and important decisions necessary to save and invest wisely and appropriately for their retirement. But brokers and advisers providing retirement investment advice are actually allowed by law to put their interests above the best interests of their clients. That means the advisers can recommend investments that generate lucrative commissions for them, even though their clients get stuck with high fees, subpar performance, and unacceptably risky products.
We’re not suggesting that everyone who gives retirement investment advice is taking advantage of their clients because many advisers do act in their client’s best interest. But, because the law does not require them to do so, far too many do not. That is not only bad for people saving for retirement, but it also enables unfair competition for those advisors who do act in the best interests of their clients. The Department of Labor’s best interest rule would change that by closing a 40 year-old legal loophole and finally require everyone who provides retirement advice to act solely in the best interests of their clients. As the DOL works to finalize this rule, candidates should make clear whether they support this proposal to help tens of millions of Americans retire with dignity and security.
Will you stand up to Wall Street and its allies and prevent attempts to roll back the financial reform law?
Wall Street did everything it could to prevent passage of the Dodd-Frank financial reform law, which was signed into law by President Obama five years ago. In the years since, it has used its unlimited resources to conduct a broad campaign to weaken, roll back, or completely kill the reforms. Wall Street’s campaign against this law has taken on many different forms: advancing bills to repeal all or part of the law, working with allies in Congress to ensure critical regulatory agencies are underfunded and understaffed, lobbying regulatory agencies to weaken or kill their rules, challenging agency rules in court, and attempting to sway Americans’ opinions through misleading public relations campaigns.
Although the Dodd-Frank law marked a major victory for protecting the American people from Wall Street’s recklessness, the work of creating a safe, sound, and stable financial system is far from over. In fact, it is really just beginning. Implementation of this law must not only be completed, but also defended against those fighting to allow Wall Street to return to business as usual. That’s why the next President must stand up to Wall Street’s tactics and its army of lobbyists and pledge defend this law and financial reforms broadly to protect the jobs, homes, savings and standard of living of the American people.
Do you support full funding for the cops on the Wall Street beat?
The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) are really the only cops on the Wall Street beat. Without them, Wall Street would just recklessly and illegally run amuck, breaking laws and ultimately breaking the financial system, the economy and the security of the American people. Unfortunately, Wall Street and its allies in Congress have severely underfunded them despite their critical mission, leaving regulators outgunned, outmanned and unable to protect the American people. As a result, their staffing and budgets are grossly inadequate to do the job the Dodd-Frank financial reform law mandates them to do – police and regulate the stock, bond, commodities, and derivatives markets – at a time when they’re needed the most.
One of the most important protections standing between Wall Street’s recklessness and Main Street wreckage is the SEC and CFTC. It’s critical that the next President understands the importance of fully funding these regulators and commits to working with Congress to make getting the SEC and CFTC cops back on the Wall Street beat a priority.
Do you support holding Wall Street executives accountable for their wrongdoing?
Crimes of finance are not victimless crimes. For example, the financial crash of 2008 and the economic wreckage it caused is going to cost the U.S. more than $20 trillion, which is more than $170,000 for every man, woman and child in the U.S. It wasn’t only illegal and criminal conduct that caused all that, but a lot of it was due to egregious illegal conduct, like inflating the fraudulent subprime housing bubble and the many crimes committed in the megabanks’ derivatives gambling. Shockingly, almost all of that was not investigated or punished (as Better Markets’ detailed in its Cost of the Crisis report here) and, therefore, future similar crimes will not be deterred.
And the megabank crime spree was even much broader than contributing to the financial crash. For example, the ongoing LIBOR scandal (or as we call it, the “lie-more” scandal) ripped off millions of Americans and affected everyone from mortgage holders to municipalities issuing bonds to investors with floating-rate financial products. The guilty finding in the case and unexpectedly long 14 year sentence sent a shocking jolt through the lawless culture that’s become corporate policy at some of the largest megabanks in the world. It’s an all too rare moment of accountability for the reckless, illegal, and criminal conduct by too many of those working at the biggest too-big-to-fail banks.
This verdict should be just the beginning of a new era of holding individuals, including supervisors and executives, responsible for their wrongdoing. That starts with demanding that the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) no longer abdicate their duty to seriously investigate and properly punish financial crimes and illegal conduct, which is the only way to deter future lawbreaking. As important, candidates should commit to holding individual executives accountable as President because banks don’t commit crimes, bankers do.
Whether a crime is committed in the streets or in the suites, swift and severe prosecution and punishment must become a priority.