“It’s about allocating capital”

For all the complexity that comes with trying to understand what a derivative is, or how hedge funds work, getting a grasp on Big Finance and controlling its speculative side comes down to a fairly simple analysis, according to at least one financial expert and advocate for Wall Street reform.



“It’s about allocating capital,” said Dean Baker, senior economist and cofounder of the Center for Economic and Policy Research, a Washington group that analyzes political and economic issues from a progressive perspective. “If I want to save money for my retirement or start a business or buy a house or whatever, it’s about connecting people from A to B. From that vantage point, what we really want is a small financial sector.”

“It has roughly quintupled relative to the size of the economy since the 1970s, and what are we getting for that?” Dean Baker, Center for Economic and Policy Research

Instead, Baker continued, “What we’ve seen has been a massive explosion of the sector. It has roughly quintupled relative to the size of the economy since the 1970s, and what are we getting for that? I don’t think that anyone can say with a straight face that we’re getting better served in the sense that capital is somehow being better allocated, or that we’re more secure in our savings.”Reining in Wall Street, then, entails “trying to restore the financial sector to its proper role in the economy,” Baker said, which “means having banks we can put our money in and be confident that it’s secure.” Baker also said a proper regulatory apparatus would make sure that nobody manipulates financial markets and that qualified small-business entrepreneurs would have access to capital.At least in the early primary states, voters seem to be thinking that the government needs to exert more, rather than less, regulatory muscle on Wall Street titans and their celebrated CEOs, whose 2017 incomes reflect the wealth disparity that benefits the top 0.1 percent. These include Jamie Dimon, JPMorgan Chase, $29.5 million; James Gorman, Morgan Stanley, $27.1 million; Lloyd Blankfein, Goldman Sachs, $24 million; and Brian Moynihan, Bank of America Merrill Lynch, $23 million. A survey , conducted by Celinda Lake of Lake Research Partners, showed that 69% overall of the electorate in Iowa, New Hampshire, South Carolina, and Nevada want tighter controls on the financial sector, with strong majorities expressing support among Republicans as well as Democrats.Taking on Wall Street requires a wide variety of policy prescriptions. Preserving the Dodd-Frank Act would sit near the top of the list–especially the act’s Volcker Rule, which seeks to limit speculative bank investments. Also crucial are the legislation’s requirements that banks that are “too big to fail” be able to cover their losses on their own, instead of seeking government bailouts. The strategies extend to strengthening agencies such as the Consumer Financial Protection Bureau, which guard against predatory lending practices, and entail grappling with private equity funds whose CEOs pay themselves tens of millions of dollars while they ransack troubled corporations and leave them as ghostly remnants of their former selves. “Regulation of Wall Street is a very, very high priority if we care about things like wealth and equality and treating consumers the way they ought to be treated,” said Carter Dougherty, communications director for Americans for Financial Reform, a coalition of 200 labor, consumer, and civil rights groups formed after the 2008 financial meltdown. The coalition co-commissioned the early-states poll with the Center for Responsible Lending, which monitors the financial marketplace on behalf of underserved borrowers nationwide.“Wall Street is pretty core to how the economy works, and as of late that has not been working well for ordinary people,” Dougherty added. “The problem is not only that people on Wall Street get rich, but that they make things work badly for other people. The key to reform here is reducing the power and profiteering of Wall Street.”Celinda Lake, who conducted the poll, thinks Wall Street will resonate as a big issue with the American public. Not everyone agrees, however.

“But how far are they willing to go for remedies is my next question, and I think there would be some limit to that.” Paul Maslin, Democratic pollster

Tough talk, but not many specifics

Paul Maslin of the Democratic polling firm of Fairbank, Maslin, Maullin, Metz & Associates, which has been retained by the Bloomberg campaign, said that among Democrats, ramping up Wall Street scrutiny ranks as “a second-tier concern” compared to healthcare, climate change, immigration, and defeating Trump. (Maslin himself is not involved in Bloomberg’s campaign.)“The fact that the two progressives [Warren and Sanders] combined can’t rack more than 35 or 40% tells you that there’s certainly a significant disparity–or at least some disagreement among Democrats about how far to go,” Maslin said. “Do Democratic voters generally have a positive view of Wall Street? No. Do they have a positive view about corporate money in politics? No. But how far are they willing to go for remedies is my next question, and I think there would be some limit to that.”Rather than targeting Big Finance, Maslin said there might be a greater groundswell of discontent among voters when it comes to the concentration of wealth and the impact of Big Tech on them and their communities in the way they communicate, consume news, and simply buy things.



In the end, whoever becomes the Democrats’ candidate may determine just how large Wall Street reform figures in the campaign for the White House–especially if neither Sanders nor Warren captures their party’s nomination. (None of the campaigns contacted for this story responded to queries about the details of their candidates’ positions on finance reform.)



Among the leading moderate Democratic candidates, Joe Biden has drawn criticism from progressives for supporting, when he was a U.S. senator from Delaware, a bill backed by the banking industry and signed into law that made it tougher for people to obtain bankruptcy protection. Biden, however, later established some pro-consumer credentials as vice president when he chaired the Middle Class Task Force under President Barack Obama and supported major financial reform legislation, such as the Dodd-Frank Act, which created the Consumer Financial Protection Bureau. Last September the Washington Post reported that Biden’s advisers are weighing the financial transactions tax–a key element in progressive platforms to impose a fee on stock trades.



The Center for Economic and Policy Research’s Baker views Biden, who, in national polls, remains his party’s frontrunner, “as sort of a guy who would be on the fence on this, but I doubt that he has any strong views like, ‘When I get there I want to rein in Wall Street.'” Nor does Baker see Buttigieg as eager to confront Wall Street, and says of Bloomberg, whose net worth is more than $60 billion, “I don’t think he’s going to have any interest in reining in Wall Street.”



As a presidential candidate, Amy Klobuchar hasn’t been nearly as harsh on Wall Street as she was in 2010, when she strongly supported Dodd-Frank. She barely mentions the financial system on her campaign website, although on her U.S. Senate site she talks about “putting Main Street ahead of Wall Street” with the Dodd-Frank reforms “to make sure that taxpayers are never again on the hook for bad bets on Wall Street.”



One reason she’s gone quiet as a candidate on the subject may be that “it’s not a priority for voters, and all the candidates are going where the voters are,” said Prof. Larry Jacobs, the director of the Center for the Study of Politics and Governance at the University of Minnesota’s Hubert H. Humphrey School of Public Affairs. Still, when Republicans pushed through a measure to water down Dodd-Frank in 2018 with the support of 16 Senate Democrats, Klobuchar voted against it, even though the regulations had forced a number of banks in her home state to go out of business due to the law’s original higher capital requirements.



“Klobuchar is very sensitive to constituent complaints,” Jacobs said, adding, “so, yes, I think that was a tougher vote for her” and that her opposition to the rollback “is a tell” about where her heart is when it comes to assessing Wall Street.



Whoever wins the nomination, of course, will be matched up against an incumbent president in Donald J. Trump, who talked tough on Wall Street in his 2016 campaign, claiming that “these hedge-fund guys are getting away with murder.” Then, once elected, he appointed one of them, Steven Mnuchin, as his Treasury secretary, and pushed through corporate tax cuts that led to record bank profits of $236.7 billion last year, before he signed the legislation that weakened regulations that Dodd-Frank imposed on big banks.



“People think he talked a good game about draining the swamp, and they thought that he was an outsider and change-oriented,” said Celinda Lake. “Then [his] policies started to catch up with him.”