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Elizabeth Warren's Comprehensive Wall Street Reform Agenda

04/17/2015 02:46 pm ET | Updated Jun 17, 2015
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Elizabeth Warren has given her fair share of great speeches, and has written some outstanding legislation on reforming Wall Street, but her speech on April 15 to the Hyman P. Minsky Conference was the best Wall Street policy speech I have ever heard her, or anyone, ever give. It was comprehensive without being a laundry list of in-the-weeds wonkiness. It laid out a strong philosophical rationale for why we need to do these reforms, and it was politically compelling as well. Her politically compelling argument laid out a strong philosophical rationale for why we need these reforms. Perhaps most importantly, she did all this while masterfully refuting the hackneyed attacks about her being anti-business, anti-growth, and anti-market forces.

Warren's series of proposed reforms would be a major and much needed boost to an economy still held down by the Wall Street abuses that brought on the collapse of the massive housing bubble, the 2008 financial collapse, and the hardest hitting economic slowdown since the Great Depression. Here is an outline of her proposals:

  • Hold financial institutions and individuals accountable for cheating customers
    • Close the auto loan loophole and extend CFPB oversight to auto dealers
    • Stop financial fraud recidivism by preventing any institution from entering into a non-prosecution agreement or deferred prosecution agreement if they are already operating under such an agreement
    • Deter future financial fraud by imposing a mandatory minimum monetary penalty at least equal to the profits generated by the illegal conduct and strengthening judicial review of deferred prosecution and non-prosecution agreements
  • Strengthen enforcement by requiring the Fed's Board of Governors to vote on all major supervisory and regulatory matters, and giving each Governor his or her own staff
    • Stop financial institutions from passing risk on to taxpayers
    • Cap the size of financial institutions as originally proposed by Senators Brown and Kaufman
    • Reinstate the barrier between commercial banking and investment banking as proposed in the 21th Century Glass-Steagall Act
    • Improve market discipline by restricting the Fed's emergency lending authority
  • Change tax policies that encourage excessive risk-taking and financial instability
    • Close the bonus loophole that allows financial institutions to write off billions in executive bonuses each year
    • Limit highly leveraged financial institutions from fully deducting their interest payments
    • Institute a targeted financial transactions tax
    • Create simple, structural rules for regulating the shadow banking sector
There are a number of important policy goals here, of course: basic fairness to consumers, a more level playing field for everyone, ending the era of the Too Big To Fail banking system, holding cheaters in the financial system more accountable, keep taxpayers from being on the hook for the big banks' risky speculation, and discouraging excessive risk-taking. All of those these are incredibly important things that will make the financial system in this country far more healthy. At the heart of this agenda, though, is one simple idea: making the financial markets work better. As Warren says in her speech:

 "...without some basic rules and accountability, financial markets don't work. People get ripped off, risk-taking explodes, and the markets blow up. That's just an empirical fact - clearly observable in 1929 and again in 2008.

The point is worth repeating because, for too long, the opponents of financial reform have cast this debate as an argument between the pro-regulation camp and the pro-market camp, generally putting Democrats in the first camp and Republicans in the second. But that so-called choice gets it wrong. Rules are not the enemy of markets. Rules are a necessary ingredient for healthy markets, for markets that create competition and innovation. And rolling back the rules or firing the cops can be profoundly anti-market.

Right now the Republicans are pushing an anti-market agenda."

Warren hits the nail on the head. To be pro-business and pro-market, you have to some rules that guarantee a level playing field, you have to have cops on the beat, and you have to have a regulatory and judicial system willing to actually prosecute the businesses who actually break the rules -- no matter how big, wealthy, and powerful those businesses are in the marketplace and political system. Market competition does not work if one business is so big and powerful that it can squeeze out its competitors, and if the rules give unfair advantages only to the richest and most politically powerful.

The people who refer to Elizabeth Warren as anti-business just don't get it. What she is in reality is anti-predator, anti-cheater, anti-monopolist, and anti-cronyism. If you have a fair system that regulates those market and competition-stifling things, then it helps the vast majority of businesses to fairly compete. What this speech reminds us is that Elizabeth Warren is a pro-business, pro-market progressive.

Here's a link to the text of the speech, and here is the speech itself: