Bloomberg distances himself from Wall Street with tough new plan
Democratic presidential hopeful Mike Bloomberg is calling for stricter rules on banks and other financial firms in an apparent bid to prove he can be tough on Wall Street despite his decadeslong ties to the industry.
Bloomberg, who earned his multibillion-dollar fortune in the finance world, says he would restore restrictions placed on banks after the 2008 crisis that have been loosened under the Trump administration, including a regulation that bans banks from making speculative gambles with depositors’ money.
The plan is peppered with ideas that Wall Street opposes, such as taxing individual financial transactions, providing financial services through the U.S. Postal Service, and decreasing the extent to which banks can rely on debt to fund their operations.
The plan nods heavily to policy proposals from progressive groups and sharply diverges from Bloomberg’s previous comments that the landmark 2010 Dodd-Frank Act is an example of “stupid laws” that companies learn to ignore. In 2014, he suggested that the regulations stemming from that sweeping law, which rewrote the rules of Wall Street, are too convoluted and many of the fines on banks had been too harsh.
The former New York City mayor will appear on the Democratic debate stage for the first time on Wednesday, where he will face Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), who have both become progressive icons in part for their aggressive stances against the financial industry. Bloomberg‘s proposal calls for strengthening the authority of the Consumer Financial Protection Bureau, Warren’s brainchild.
“The financial system isn’t working the way it should for most Americans,” Bloomberg said in a press release. “The stock market is at an all-time high, but almost all of the gains are going to a small number of people, and our economy is still vulnerable to another shock like the 2008 financial crisis that devastated families and communities all over the country.”
Bloomberg’s plan calls for stepped-up rules on nonbanks, like insurance companies and mortgage lenders, that have become so integral to the financial system that they could pose a threat to the broader economy if they were to fail. An interagency regulator created by Dodd-Frank to police such risks, the Financial Stability Oversight Council, has seen its role dwindle under President Donald Trump.
Bloomberg's proposals would also overhaul the U.S. mortgage market by merging Fannie Mae and Freddie Mac and solidifying their role as a fully government-owned agency. Those giant companies buy mortgages, fold them into securities and then stamp a guarantee on those instruments, to promote home ownership.
Since the crisis when Fannie and Freddie were on the brink of collapse, the U.S. government has owned a majority stake, but the current administration has begun taking steps toward releasing them as private companies.
Bloomberg also suggests reining in high-speed trading, cracking down on payday lenders, and discouraging deals by the Justice Department with financial firms where they are fined but not prosecuted.
The plan also addresses forward-looking regulatory questions around financial technology, including support for allowing startups more flexibility to experiment with new methods of providing services without facing penalties from regulators.
It calls for more rules around so-called cryptocurrencies, which are digital and not issued by a centralized authority like the Federal Reserve. Bloomberg says regulators should provide clearer rules around which agencies have oversight, when crypto assets should be treated as tradable securities rather than as payment for a good or service, and how consumers will be protected from fraud.
