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Tag: financial reform
Clinton Proposal Calls For Breakup Of ‘Too-Big-To-Fail’ Banks

Clinton Proposal Calls For Breakup Of ‘Too-Big-To-Fail’ Banks

By John McCrank

NEW YORK (Reuters) — U.S. Democratic presidential hopeful Hillary Clinton on Thursday introduced a plan to curb what she called Wall Street abuses, including a “risk fee” on the largest financial institutions and breaking up banks considered “too big to fail.”

Under the proposal, Clinton would charge a yearly “risk fee” on a sliding scale on the liabilities of banks with more than $50 billion in assets along with other institutions overseen by financial regulators, her campaign said.

The proposals also called for raising the fines that regulators could impose on corporations and their executives, and imposing a new tax on high-frequency trading (HFT).

“These sound like much more meaningful reforms than some of the things she has suggested earlier,” said former Federal Deposit Insurance Corp Chair Sheila Bair, currently president of Washington College, in Chestertown, Maryland.

Clinton’s HFT tax would target securities transactions with excessive levels of order cancellations, which her campaign said unnecessarily burdens markets and enables unfair and abusive trading strategies.

HFT firms say their trading adds needed liquidity and that such a tax would end up making the markets less efficient and more expensive for all investors. There were also concerns that the proposals could be expanded.

“We are concerned that this is an opening salvo that could eventually lead to a proposal to tax mom and pop investors,” said Bill Harts, chief executive officer of HFT advocacy group Modern Markets Initiative.

Clinton would also pursue additional oversight of the “shadow-banking” sector by imposing other margin and collateral requirements on risky short-term borrowing; review recent regulatory changes to the money market fund industry for possible holes; create new reporting requirements for hedge funds and private equity firms; and strengthen the authority of the Financial Stability Oversight Council.

Unless the Democrats win a majority in the Senate and retake the House of Representatives in the 2016 elections, the chances of the proposals being enacted are low, Keefe, Bruyette & Woods said in a note to clients.

(Additional reporting by Ross Kerber, Sarah Lynch, Dan Freed, David Henry, Olivia Oran; Editing by Jeffrey Benkoe)

Photo: U.S. Democratic presidential candidate Hillary Clinton speaks during a community forum campaign event at Cornell College in Mt Vernon, Iowa, October 7, 2015. REUTERS/Scott Morgan

Hillary Clinton Supports Ban On ‘Revolving Door’ Corporate Bonuses

Hillary Clinton Supports Ban On ‘Revolving Door’ Corporate Bonuses

NEW YORK (Reuters) — U.S. presidential candidate Hillary Clinton endorsed a proposed law on Monday that would prevent corporate firms paying bonuses to their executives for leaving to take senior government jobs.

Clinton, in an op-ed published by The Huffington Post, was critical of the “so-called revolving door” between government and Wall Street firms in particular, saying it erodes public trust “if a public servant’s past and future are tied to the financial industry.”

“That’s when people start worrying that the foxes are guarding the hen house,” Clinton, the front-runner in the race to win the Democratic Party’s nomination for the 2016 election, wrote. “If you’re working for the government, you’re working for the people — not for an oil company, drug company, or Wall Street bank or money manager.”

Support for the proposed Financial Services Conflict of Interest Act had become a sort of litmus test for the Democratic Party’s progressive wing, which is seeking far more stringent oversight of the U.S. financial services industry.

Elizabeth Warren, the Massachusetts senator who has become a standard-bearer for the party’s progressives, called on presidential candidates to endorse the bill last month shortly after it was introduced.

The law would ban incoming government employees from accepting such bonuses, sometimes known as “golden parachutes”, from their former private sector employers.

It would also require senior government regulators to recuse themselves from any work that would particularly benefit any employer or client they had in the two years before joining the government.

Bernie Sanders, the socialist Vermont senator who is Clinton’s nearest rival for the nomination, had already given the bill his support, as had Martin O’Malley, a former Maryland governor, who has been lagging in public polls.

Last week, groups representing Democratic progressives called for Clinton to make her position clear.

Clinton co-wrote her Monday op-ed with Senator Tammy Baldwin of Wisconsin, the bill’s Democratic sponsor.

(Reporting by Jonathan Allen; Editing by Andrew Hay)

Photo: Democratic presidential candidate Hillary Clinton addresses the Democratic National Committee (DNC) Summer Meeting in Minneapolis, Minnesota, August 28, 2015. REUTERS/Craig Lassig

House Approves Volcker Rule Delay Despite Obama Veto Threat

House Approves Volcker Rule Delay Despite Obama Veto Threat

By Jim Puzzanghera, Los Angeles Times (TNS)

WASHINGTON — The House defied a veto threat by President Barack Obama and voted Wednesday to approve a two-year delay in implementing part of the so-called Volcker Rule, a key banking regulation enacted in the wake of the 2008 financial crisis.

The delay was the most controversial of numerous changes in the 2010 Dodd-Frank financial regulatory overhaul that the House approved by a 271-154 vote in the latest Republican effort to weaken a law that nearly all of them opposed.

Republicans described the changes as minor fixes to a complicated law that were needed to avoid overburdening businesses. There were 29 Democrats who joined with all but one Republican, Walter Jones of North Carolina, in approving the bill Wednesday.

“These are smart, technical reforms to an overly burdensome law, Dodd-Frank, that are bipartisan,” said Rep. Michael Fitzpatrick (R-PA), who sponsored the package of changes.

“These regulations may have been targeting Wall Street, but their burden falls heavily on Main Street,” he said.

Most of the changes have enjoyed broad bipartisan support in previous House votes.

But Obama and most Democrats opposed the new bill largely because of the revisions to the Volcker Rule, a centerpiece of Dodd-Frank that prohibits banks from trading for their own profit and limits their ownership of risky investments.

Part of the rule requires banks to divest their holdings of collateralized loan obligations, types of financial securities primarily backed by commercial loans. The Federal Reserve already delayed that requirement to 2017.

The House bill would delay it until 2019. The move has been strongly pushed by financial industry lobbyists, who said it would prevent banks from having to sell their investments in a fire-sale fashion.

Rep. Maxine Waters (D-CA), one of the chief defenders of the Dodd-Frank law, said that the delay wasn’t needed.

“Somehow, Wall Street bankers, the supposedly smartest people in the room, can’t seem to comply with a law passed in 2010 by … 2017,” she said. “Seven long years isn’t enough. The Republicans and the banks want nearly a decade.”

In its veto threat, the White House said the Obama administration “has significant concerns with provisions that would undermine the Volcker Rule.”

But supporters of the bill said Democrats were overreacting.

“For some members of the Democrat Party, apparently Dodd-Frank has been elevated beyond ideology to religion and there can be no changes in a 2,000-page bill that we know to be fraught with unintended consequences,” said House Financial Services Committee Chairman Jeb Hensarling (R-TX), a leading opponent of the law.

Rep. Andy Barr (R-KY) noted the House bill “doesn’t do away with the Volcker Rule” but simply makes some changes needed to help banks and make sure credit remains available for businesses.

It’s unclear if the new Republican majority in the Senate will take up the bill and if opponents, led by Sen. Elizabeth Warren (D-MA), have enough votes to filibuster it.

But Republican leaders could try to attach the legislation to a government funding bill or other so-called must-pass measures that would be difficult for Obama to veto.

That’s the strategy they’ve used in recent weeks to make some other important changes to Dodd-Frank, including easing restrictions on bank trading of financial derivatives.

Photo: Mathew Knott via Flickr