Elizabeth Warren pivoted her presidential campaign on Thursday to the issue that made the Massachusetts senator a hero of the progressive left long before she was first elected in 2012: Reining in Wall Street.
In an extensive plan released two weeks ahead of the second round of Democratic presidential debates hosted by CNN, Warren is calling for the reinstatement of a modern Glass-Steagall Act, which would wall off commercial from investment banks, new restrictions on the private equity industry, and legislative action to more closely tie bank executives’ pay to their companies’ performance.
The proposal is red meat for the Democratic party’s liberal base, which has zeroed in on Wall Street speculation as a root cause of growing economic inequality. Backlash from the financial industry would be an added bonus for Warren’s campaign, which is keen to remind primary voters of her long record of opposing deregulation and supporting stricter rules on the big banks and other corporate lenders. The plan arrives as Warren climbs in most public polling of the 2020 race, placing her in firmly in a four-candidate mix — with former Vice President Joe Biden, and Sens. Bernie Sanders of Vermont and Kamala Harris of California — at the front of the pack.
“In the lead-up to the 2008 crisis, I rang the alarm bell as I saw the same tricks and traps emerging in mortgages,” Warren says, recalling her pre-Senate record, in a Medium post. “And after I proposed a new federal agency to protect consumers — and President Obama signed that agency into law in 2010 — I spent nearly a year setting up the new Consumer Financial Protection Bureau and helping write new rules to crack down on financial scams.”
This latest policy rollout is the second piece of what Warren is calling her “economic patriotism agenda.” Her campaign’s proposals are designed to curtail capitalist excess by increasing oversight and implementing rules to increasing corporate accountability to workers and small-time investors.
“For decades, Washington has lived by a simple rule: if it’s good for Wall Street, it’s good for the economy,” Warren writes. “To raise wages, help small businesses, and spur economic growth, we need to shut down the Wall Street giveaways and rein in the financial industry so it stops sucking money out of the rest of the economy.”
In an effort to force top bankers to think twice about riskier investments, Warren wants to create new regulations that would allow them to feel more pain when a bet goes bad.
“We should impose tough new executive compensation rules for bankers that discourage needless speculation and encourage productive investments,” she writes. “If a banker makes a big bet and wins in the short run, he can get a huge year-end bonus. But if he makes a big bet and loses — either immediately or in the long run — his firm takes the loss and no money comes out of his own pocket.”
Warren’s plan would also create, in effect, a public option for consumer banking that would use the United States Postal Service as a partner “to provide access to low-cost, basic banking services like checking and savings accounts at post offices and online.” So-called “postal banking,” which Warren has backed in the past, has been a progressive priority for years. Sanders touted it alongside New York Rep. Alexandria Ocasio-Cortez during the May rollout of their bill to combat predatory lending. Sen. Kirsten Gillibrand, another 2020 candidate, introduced legislation in 2018 to create a “Postal Bank.”
A source familiar with Warren’s proposals tells CNN that Wall Street private equity firms and banks are unlikely to strongly oppose or publicly engage on Warren’s plan, saying that firms and banks don’t want to give the proposals oxygen.
Perhaps the most detailed element of Warren’s latest plan deals with private equity firms, whose business model she describes as “legalized looting” that “suck(s) value out of the economy.”
Private equity firms typically make money by purchasing small or failing companies, whipping them into shape — often by laying off workers or selling off their assets — then spinning them off for a profit. They have also been known to weigh down their investments with debt, then walk off, as Warren writes, with “a juicy profit” when bankruptcy comes and employees are left out in the cold.
“Sometimes the companies do well,” Warren writes. “But far too often, the private equity firms are like vampires — bleeding the company dry and walking away enriched even as the company succumbs.”
Drew Maloney, president and CEO of the American Investment Council, a group representing the private equity industry, shot back at Warren Thursday morning.
“Private equity is an engine for American growth and innovation — especially in Senator Warren’s home state of Massachusetts,” Maloney said in a statement. “Extreme political plans only hurt workers, investment, and our economy.”
According to Warren’s agenda, the industry’s practices would be curtailed by new rules and regulations — like a requirement to put the firms on the hook for workers’ pension obligations and tightening bankruptcy laws “so that when companies go bust, workers have a better shot at getting pay and benefits and executives can’t pocket special bonuses.”
