WASHINGTON, Oct 11: Breaking up big banks is one of the rallying cries of liberals when it comes to the economy. Now Hillary Rodham Clinton has all but embraced the cause.
Her campaign announced on Thursday that Clinton would seek to break up banks that regulators deem "too large and too risky," according to a proposal her campaign released, a direct strike at the "too big to fail" institutions that have grown larger in the wake of the financial crisis. The proposal adds to the Democratic front-runner's calls for further tightening of financial regulations on Wall Street.
Clinton's proposal also seeks a tax on certain forms of computerised trading that critics say create financial instability, improved transparency in markets where prices aren't publicly disclosed, and harsher penalties for banking executives whose subordinates violate the law.
Another provision would levy a tax on liability held by major banks. The fee could lessen the advantage that banks enjoy when they are viewed as too big to fail. Creditors who think the government would bail out a bank in a crisis will accept discounted interest rates on money they lend to the bank, confident it will be repaid.
As a complement to the fee, the proposal says that Clinton would support rules that banks hold even more money in reserve - known as capital requirements.
Clinton's plan "would make life very difficult for JPMorgan [Chase] in its current form," said Dean Baker, co-director of the liberal Centre for Economic and Policy Research and an advocate of stricter financial regulations.
As president, Clinton would need congressional approval to implement some important provisions. Others would depend on the Federal Reserve. And in many cases, the devil would be in the details.
For example, would the criteria for "too large and too risky" be generous and allow current banking behemoths to operate as they currently do? Would the big ones indeed be forced to break up? Or would there be a compromise?
Despite the passage of the Dodd-Frank financial-overhaul law in 2010, investors still view some banks as being too big to fail.
If nothing else, the tone of the proposals may allay concerns among some liberals about Clinton's connections to Wall Street. Many of her advisers previously held posts in finance. Facing increasing pressure from liberal Sen. Bernie Sanders (I-Vermont) in the Democratic primary, Clinton has recently advanced a range of liberal positions in addition to the tough approach to Wall Street, including opposition to the Asian trade pact and the Keystone pipeline.
Clinton's aggressive proposals suggest a shift in thinking about the financial industry among the party's policymakers and its rank and file, Baker said. When Clinton's husband served as president, many leading Democrats believed that financial innovation was beneficial, but the securities developed on Wall Street during that period would later be blamed for the financial crisis. ?The Washington Post