Public Citizen has always worked to protect consumers’ pocketbooks, defending against proposals that put our economy at risk and ensuring that individuals are safeguarded against wrongdoing by financial institutions. For example, since President Donald Trump took office, the organization has battled the Administration’s efforts to dismantle financial rules designed to prevent the sort of predatory banking behavior that caused the 2008 economic crash. Public Citizen has also opposed appointments of Wall Street insiders to key financial positions, defended against legislation to reduce government oversight of monetary institutions, and fought tax cuts for Big Bank CEOs and other moneyed interests that were enacted at the expense of working class Americans.
However, Public Citizen has played more than just defense in the past year. In addition to fighting harmful proposals, Public Citizen has partnered with the Take on Wall Street campaign to advocate for proactive financial reforms that build on the success of the Dodd-Frank Wall Street Reform and Consumer Protection Act, take further steps to curb the power of Wall Street banks, and build a financial system that better represents the interests of ordinary Americans.
Since its founding in 2016, Take on Wall Street, a coalition of more than 50 national and local organizations, has pressured lawmakers to enact financial reforms to require Wall Street to pay its fair share of taxes, to reduce risk in our economy, and provide more options for underbanked communities. Policies endorsed by Take on Wall Street include: close the carried interest loophole, which allows billionaire money managers to pay lower tax rates than low and middle income workers; close the loophole that allows corporations to deduct some multi-million dollar CEO bonuses; create a Wall Street speculation tax to discourage unstable, short-term betting while simultaneously generating much-needed public revenue; break up commercial and investment banking; and expand access to fair consumer banking services through public options such as postal banking.
Voters on both sides of the aisle support these policy proposals.
2018 survey data from 1,000 likely 2018 voters and 350 “drop-off voters,” voters who consistently cast ballots in presidential elections, but inconsistently in midterms, in 100 congressional battleground districts reveal that:
- The majority of both likely voters and drop-off voters believe that Wall Street holds disproportionate sway in politics (likely voters: 66% too high, 3% too low; drop-off voters: 64% too high, 5% too low).
- The belief that Wall Street plays a distorted role in politics is an important determinant of future vote choice. A majority of drop-off voters (59%) report that “curbing Wall Street’s influence” is an issue that will influence their vote decision in 2018.
- Voters intend to reward candidates who are in favor of decreasing Wall Street’s sway in politics and punish candidates who do not. Majorities of both likely and drop-off voters say they are more likely to support a candidate who refused to accept campaign donations from big banks and Wall Street executives (55% and 60% more likely, respectively).
- Voters are less likely to support a candidate who has received such donations from big banks and Wall Street executives (51% less likely among likely voters and 61% less likely among drop-off voters).
However, instead of responding to voters’ general belief that Wall Street has too much influence in American politics, President Trump and the Republican majority in Congress have further entrenched the power of financial elites. The GOP-Trump tax bill, passed in December of 2017, amounted to a tax cut for Big Banks, slashing the corporate tax rate from 35 to 21 percent and providing other cuts that benefit Wall Street CEOs and billionaire investors. Similarly, the tax bill’s so-called reforms to the carried-interest loophole left this tax break for rich investment managers essentially untouched. Furthermore, since the law’s signing, companies have bought back their own stocks at record speeds, returning trillions of dollars to shareholders and venture capitalists instead of reinvesting in the workforce or increased production.
The Trump Administration and the sitting Congress have also acted contrary to voter desires on specific measures. For instance, in May 2018, Trump signed a repeal of Consumer Financial Protection Bureau (CFPB) guidance that discouraged discrimination in auto lending. Survey respondents, meanwhile, endorsed penalizing financial companies for ethnic and racial biases. Over three quarters of likely voters (77%) and more than eight in ten drop-off voters (83%) strongly supported “holding financial companies accountable if they discriminate against people based on their race or ethnicity.” This endorsement is consistent across party lines, receiving support from 94% of Democrats (92% strongly), 89% of independents (83% strongly), and 81% of Republicans (64% strongly).
Another proposal that voters also overwhelmingly endorsed is separating commercial banking from investment banking (likely voters: 72% support, including 53% strong support; drop-off voters 71% support, including 53% strong support). This proposal, long advocated by Public Citizen, has bipartisan support: 77% of Democratic, 82% of Independent, and 67% of Republican survey respondents were in favor.
Passing a 21st Century version of the 1933 Glass-Steagall Act (S. 881/ H.R. 2585) would create this banking separation desired by voters across the spectrum. Signed by Congress in the aftermath of the Great Depression and repealed in 1999, the original Glass-Steagall Act forbade commercial banks from participating in investment banking. Commercial banks manage deposit (checking and savings) accounts for individuals and businesses, while investment banks buy and sell stocks, bonds, and other investments. Mixing the activities of federally-regulated, lower-risk commercial banks with those of less-regulated, risk-prone investment banks contributed to the financial crashes of both the early 20th and 21st centuries. Updating and reinstating the Glass-Steagall Act would make it harder for banks to engage in the greedy, profit-driven behavior that exposes ordinary consumers to undue risk.
Instead of moving to reinstate Glass-Steagall, however, the White House is attempting to roll back the Volcker Rule, a provision of the 2010 Dodd Frank Wall Street Reform and Consumer Protection Act. The Volcker Rule, enacted in response to the 2008 financial crisis, prohibits proprietary trading—trading on the bank’s own behalf—and requires banks to prove to regulators that all trading positions are held to benefit customers, not increase profits. Republican-backed changes to the rule would shift oversight powers away from outside regulators and towards banks themselves.
It is important to note that unlike the Glass Steagall Act, the Volcker Rule is not a comprehensive separation of banking sectors. However, like Glass-Steagall, Volcker requirements present barriers to the speculative investment banking that helped cause the 2008 crash. Dismantling the Volcker Rule is another step backwards in achieving the banking reforms that voters endorse.
Even though Trump’s financial agenda flies in the face of voters’ preferences and best interests, it’s not too late to flip this script. Call your U.S. Representative and Senators today and tell them to support the 21st Century Glass Steagall Act and other legislation supported by Public Citizen and the Take on Wall Street campaign. With your help we can counter the power of Big Bank lobbyists and achieve the policies that voters support.
Photo: Aaron Bauer/CC BY 2.0