Democrats: ‘Restore Economic Fairness’
To restore economic fairness, Democrats will fight against the greed and recklessness of Wall Street. Wall Street cannot be an island unto itself, gambling trillions in risky financial instruments and making huge profits, all the while thinking that taxpayers will be there to bail them out again. We must tackle dangerous risks in big banks and elsewhere in the financial system. We must make Wall Street work for the job-creating, productive economy — including by making loans more affordable for small- and medium-sized businesses. We need to prohibit Wall Street from picking and choosing which credit agency will rate its products as well as from imposing excessive fees on consumers. And we must hold both individuals and corporations accountable when they break the law.
Democrats believe that no bank can be too big to fail and no executive too powerful to jail. Democrats will support stronger criminal laws and civil penalties for Wall Street criminals who prey on the public trust. We also support extending the statute of limitations for prosecuting major financial fraud, and providing the Department of Justice, the Securities and Exchange Commission, and the Commodity Futures Trading Commission more resources to prosecute wrongdoing. “Equal Justice Under Law” will not just be words engraved on the entrance of the Supreme Court. It will be the standard that applies to Wall Street and all Americans.
We will also vigorously implement, enforce, and build on President Obama’s landmark Dodd-Frank financial reform law, and we will stop dead in its tracks every Republican effort to weaken it. We will stop Republican efforts to hamstring our regulators through budget cuts, and we will ensure they have the resources and independence to fully enforce the law and hold both individuals and corporations accountable when they break the rules. We will also continue to protect consumers and defend the Consumer Financial Protection Bureau from Republican attacks. We oppose any efforts to change the CFPB’s structure from a single director to a partisan, gridlocked commission and likewise oppose any efforts to remove the bureau’s independent funding and subject it to the appropriations process. Democrats will also continue to support the CFPB in enforcing foundational civil rights laws protecting against discrimination in consumer lending. Democrats condemn predatory payday lending, and will protect consumers by defending the CFPB and implementing strong new regulations…
Democrats will not hesitate to use and expand existing authorities as well as empower regulators to downsize or break apart financial institutions when necessary to protect the public and safeguard financial stability, including new authorities to go after risky shadow-banking activities. Banks should not be able to gamble with taxpayers’ deposits or pose an undue risk to Main Street. Democrats support a variety of ways to stop this from happening, including an updated and modernized version of the Glass-Steagall Act as well as breaking up too-big-to-fail financial institutions that pose a systemic risk to the stability of our economy.
We believe that personnel is policy. We will nominate and appoint regulators and officials who are not beholden to the industries they regulate — people with a track record of standing up to power and safeguarding the public trust. We will crack down on the revolving door between the private sector — particularly Wall Street — and the federal government. We will ban golden parachutes for those taking government jobs.
We will limit conflicts of interest by requiring bank and corporate regulators to recuse themselves from official work on particular matters that would directly benefit their former employers. And we will bar financial service regulators from lobbying their former colleagues for at least two years. We will protect and defend the Federal Reserve’s independence to carry out the dual mandate assigned to it by Congress — for both full employment and low inflation — against threats from new legislation. We will also reform the Federal Reserve to make it more representative of America as a whole, and we will fight to enhance its independence by ensuring that executives of financial institutions are not allowed to serve on the boards of regional Federal Reserve banks or to select members of those boards.
At a time when many of the largest banks have shunned communities across America, Democrats believe that we need to give Americans affordable banking options, including by empowering the U.S. Postal Service to facilitate the delivery of basic banking services.
Republicans: ‘Freeing Financial Markets’
The Republican vision for American banking calls for establishing transparent, efficient markets where consumers can obtain loans they need at reasonable rates based on market conditions. Unfortunately, in response to the financial institutions crisis of 2008-2009, the Democratic-controlled Congress enacted the Wall Street Reform and Consumer Protection Act, otherwise known as Dodd-Frank. They did not let the crisis go to waste but used it as an excuse to establish unprecedented government control over the nation’s financial markets. The consequences have been bad for everyone except federal regulators.
Rather than address the cause of the crisis — the government’s own housing policies — the new law extended government control over the economy by creating new unaccountable bureaucracies. Predictably, central planning of our financial sector has not created jobs, it has killed them. It has not limited risks, it has created more. It has not encouraged economic growth, it has shackled it.
Since the enactment of Dodd-Frank, the number of community banks has significantly declined, and the cost and complexity of complying with the law has created impediments to the remaining banks’ ability to support the customers they serve. From 13,000 community banks in 1985, only 1,900 remain. Still, the majority of agricultural loans and small business loans are made by community banks. From start-ups foregone to home loans not made, Dodd-Frank’s excessive regulation and burdensome requirements have helped contribute to the slow economy we all endure today under President Obama and the Democrats.
Community banks are essential to ensuring small businesses have easy and affordable access to the capital they need to grow and prosper. Community banks should be relieved of excessive regulations. We support removing roadblocks and regulations that prevent access to capital.
The worst of Dodd-Frank is the Consumer Financial Protection Bureau, deliberately designed to be a rogue agency. It answers to neither Congress nor the executive, has its own guaranteed funding outside the appropriations process, and uses its slush fund to steer settlements to politically favored groups. Its director has dictatorial powers unique in the American republic. Its regulatory harassment of local and regional banks, the source of most home mortgages and small business loans, advantages big banks and makes it harder for Americans to buy a home. Its one-size-fits-all approach to every issue threatens the diversity of the country’s financial system and would leave us with just a few enormous institutions, as in many European countries.
If the bureau is not abolished, it should be subjected to congressional appropriation. In that way, consumer protection in the financial markets can be advanced through measures that are both effective and constitutional. Any settlements arising from statutory violations by financial institutions must be used to make whole the harmed consumers, with any remaining proceeds given to the general treasury. Diversion of settlement funds to politically-connected parties should be a criminal offense.
Republicans believe that no financial institution is too big to fail. We support legislation to ensure that the problems of any financial institution can be resolved through the bankruptcy code. We endorse prudent regulation of the banking system to ensure that FDIC-regulated banks are properly capitalized and taxpayers are protected against bailouts. We will end the government’s use of disparate impact theory in enforcing anti-discrimination laws with regard to lending.