Seven
years after the financial crash, despite important new rules signed
into law by President Barack Obama, there are risks in our financial
system that could still cause another crisis. Banks have paid billions
of dollars in fines, but few executives have been held personally
accountable. “Too big to fail” is still too big a problem. Regulators
don’t have all the tools and support they need to protect our economy.
To prevent irresponsible behavior on Wall Street from ever again
devastating Main Street, we need more accountability, tougher rules and
stronger enforcement. I have a plan to build on the progress we’ve made
under President Obama and do just that.
In the years before the
crash, as financial firms piled risk upon risk, regulators in Washington
either couldn’t or wouldn’t keep up. Top regulators under President
George W. Bush posed for a picture literally taking a chain saw to
banking rules. Before the crisis hit, as a senator from New York, I was
alarmed by this gathering storm, and called for addressing the risks of
derivatives, cracking down on abusive subprime mortgages and improving
financial oversight. Unfortunately, the Bush administration and
Republicans in Congress largely ignored calls for reform. The result
cost 9 million Americans their jobs, drove 5 million families out of
their homes and wiped out more than $13 trillion in household wealth.
Too Big to Fail
Thanks
to President Obama’s leadership and the determination and sacrifice of
the American people, we’ve worked our way out of that ditch and put our
economy on sounder footing. Now we have to keep going.
First, it’s
time for more accountability on Wall Street. Stories of misconduct in
the financial industry are shocking -- like HSBC allowing drug cartels
to launder money or five major banks pleading guilty to felony charges
for conspiring to manipulate currency exchange rates. This is criminal
behavior, yet the individuals responsible often get off with limited
consequences -- or none at all. I want to change that.
People who
commit serious financial crimes should face serious consequences,
including big fines, disbarment from working in the industry and the
prospect of imprisonment. As president, I will seek to extend the
statute of limitations for major financial crimes, enhance
whistle-blower rewards, and increase resources for the Department of
Justice and the Securities and Exchange Commission to investigate and
prosecute individuals. We should also hold financial executives
accountable for egregious misconduct by their subordinates. They need to
lose their bonuses and, in some cases, their jobs.
Second, I will
work with Congress and independent regulators to rein in the complexity
and riskiness of major financial institutions. The Dodd-Frank Act that
President Obama signed after the crisis has already made important
reforms, but there’s more to do.
One serious approach being
advocated is to pass an updated Glass-Steagall Act, separating
commercial and investment banking, to reduce the size of the banks and
the risk of a taxpayer bailout. I certainly share the goal of never
having to bail out the big banks again, but I prefer the path of
tackling the most dangerous risks in a different way.
To start, I
will propose a new fee on risk that would discourage the type of
excessive leverage and short-term borrowing that could spark another
crisis. We should also strengthen and enforce the Volcker Rule so banks
can’t make risky and speculative trading bets with taxpayer-backed
money. And if a bank suffers losses that threaten its overall financial
health, senior managers should lose some or all of their bonus
compensation. That will ensure that financial executives have skin in
the game and a real incentive to avoid reckless risk-taking.
My
plan would also give regulators the authority they need to reorganize,
downsize or even break apart any financial institution that is too large
and risky to be managed effectively. It is a comprehensive and flexible
approach. It allows regulators to adapt to changing markets and help
ensure that large financial firms never pose a danger to our entire
economy.
We’ve learned the hard way that there’s no substitute for
tough, empowered regulators with the resources and support to do their
job. That’s why I’ve supported Wisconsin Senator Tammy Baldwin’s bill to
restore trust in government and slow Wall Street’s revolving door. We
need to find the best, most independent-minded people for these
important regulatory jobs -- people who will put consumers and everyday
investors ahead of the industries and institutions they’re supposed to
oversee.
Third, we need a comprehensive strategy to reduce risk
everywhere in the financial system. After all, many of the firms at the
heart of the crash in 2008, like Lehman Brothers, Bear Stearns and AIG,
were not traditional banks. I’ll push for stronger oversight of the
“shadow banking” sector, which includes certain activities of hedge
funds, investment banks and other nonbank finance companies.
Trading on Speed
Fourth,
we need to ensure that everyday investors and consumers can trust that
our financial markets work for them -- and not just for insiders with
the most sophisticated, specialized and fastest connections. That is why
we should impose a tax on the high-frequency trading that makes our
markets less stable and less fair. And we should reform the rules that
govern our stock markets to ensure equal access to markets and
information, increase transparency, and minimize conflicts of interest.
Finally,
I will veto any legislation that would weaken Dodd-Frank. We can’t go
back to the days when Wall Street could write its own rules. I believe
we can defend Dodd-Frank while easing burdens on community banks so they
are able to lend responsibly to the hardworking families and small
businesses they know and trust. We also have to defeat Republican
attempts to gut the Consumer Financial Protection Bureau -- an agency
dedicated solely to protecting Americans from unfair and deceptive
financial practices -- and to exploit the upcoming budget and
debt-ceiling negotiations for rollbacks in financial reforms.
The
bottom line is that we can never allow what happened in 2008 to happen
again. 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.
With strong rules of the road and smart incentives, the financial
industry can help more young families buy that first home, make it
possible for entrepreneurs to create new small businesses and support
hardworking Americans saving for retirement. My plan will help us unlock
that potential. We’ll create good-paying jobs, raise incomes and help
families afford a middle-class life, with less speculation and more
growth -- growth that’s strong, fair and long-term. That’s what I’m
fighting for in my campaign, and that’s what I’ll do as president.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the author of this story:
Hillary Clinton at
press@hillaryclinton.com
To contact the editor responsible for this story:
David Shipley at
djshipley@bloomberg.net
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