The contrast between the parties at this stage is striking. Potential Republican presidential candidates are arguing among themselves about almost everything, from economics to social issues; it is hard to say which ideas and arguments will end up on top. The Democrats, by contrast, are in agreement on most issues, with one major exception: financial reform and the power of very large banks.<\/p>\n
The Democrats\u2019 internal disagreement on this issue is apparent. On Dodd-Frank, Democrats differ on the extent to which they should stick up for their own reforms. In December, the White House agreed to a Republican proposal to repeal a provision of Dodd-Frank that would have limited the risk-taking of the country\u2019s largest banks (in fact, the proposal\u2019s language was drafted by Citigroup).<\/p>\n
More recently, however, Obama has threatened to veto any further attempts to roll back financial reform.\u00a0 He a proposing a small tax on the largest banks\u2019 liabilities, which he hopes will encourage \u201cthem to make decisions more consistent with the economy-wide effects of their actions, which would in turn help reduce the probability of major defaults that can have widespread economic costs.\u201d<\/p>\n
In contrast, the Center for American Progress report devoted very little space to financial-sector reform.<\/p>\n
But a serious challenge to all of these views has now emerged, in proposals by Senator Elizabeth Warren, a rising Democratic star who has become increasingly prominent at the national level.\u00a0 In her view, the authorities need to confront head-on the outsize influence and dangerous structure of America\u2019s largest banks.<\/p>\n
Warren\u2019s opponents like to suggest that her ideas are somehow outside the mainstream; in fact, she draws support across the political spectrum.<\/p>\n
Warren\u2019s message is simple: remove the implicit government subsidies that support the too-big-to-fail banks. That single move would go a long way toward reducing, if not eliminating, crony capitalism and strengthening market competition in the financial sector.<\/p>\n
The big Wall Street banks have enormous influence in Washington, DC, in large part because of their campaign contributions. They also support \u2013 directly and indirectly \u2013 a vast influence industry, comprising people who pose as independent or moderate commentators, edit the financial press, or produce bespoke \u201cresearch\u201d at think tanks.<\/p>\n
The Democrats need to figure out their policy on Wall Street. In the past, they have simply gone for the campaign contributions, doling out access and influence in exchange. It is now obvious that this is not consistent with defending what remains of Dodd-Frank.<\/p>\n
Warren offers a plausible, moderate alternative approach to financial-sector policy that would attract a great deal of support in the general election. Will the Democrats seize the opportunity?\u00a0 Hillary Clinton is on Wall Street’s payroll.<\/p>\n
Simon Johnson writes:\u00a0\u00a0 America\u2019s presidential election is still nearly two years away, and few candidates have formally thrown their hats into the ring. But both Democrats and Republicans are hard at work figuring out what will appeal to voters in … Continue reading ![\"Who](\"http:\/\/www.w-t-w.org\/en\/wp-content\/uploads\/2015\/01\/Who-Sides-with-Wall-Street-300x147.jpg\")
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