On Wednesday evening, President Barack Obama called for a new Wall Street crackdown, noting that more than five years after the financial crisis, banks still focus too much on gaining profits through often risky trading, instead of investing in Main Street America.
"More and more of the revenue generated on Wall Street is based on…trading bets, as opposed to investing in companies that actually make something and hire people," the president said in an interview with Marketplace host Kai Ryssdal. He called for "additional steps" to rein in the industry.
Obama's comments Wednesday represent one of the most pointed critiques he has made of the banking industry since he took office at the height of the financial crisis, and suggest that he may use his final two years in office to pursue further Wall Street reforms.
The president singled out big bonuses as a central problem plaguing the financial system. Banks can still "generate a huge amount of bonuses by making some big [trading] bets," he said. "If you make a really bad bet, a lot of times you've already banked all your bonuses. You might end up leaving the shop, but in the meantime everybody else is left holding the bag."
He did not offer specific policy cures, instead alluding to the need to "restructure" how banks work "internally."
The massive Dodd-Frank financial reform law that Congress passed in 2010 was supposed to keep banks from taking excess risks and prevent another economic collapse. Obama pointed out that much of that law has already gone into effect. Banks now have to keep more funds on hand to guard against an economic downturn or a bad trading bet, he said. The law created a new agency designed to prevent consumers from being duped by mortgage lenders, credit card companies, and student lenders. Last year, Wall Street regulators implemented a much-touted Dodd-Frank measure aimed at limiting the high-risk trading by commercial banks that helped lead to the 2008 economic crash.
But much is left to be done. Wall Street regulators have completed only about half of the banking rules mandated by Dodd-Frank. Scores of these regulations have been watered down by financial industry lobbyists. Congress has made many legislativeattempts to weaken Dodd-Frank. Despite efforts to ensure that banks are no longer too-big-to-fail—or so large that their collapse would endanger the entire economic system—the largest banks are bigger than they were during the financial crisis.
Progressives fault the president for part of the lax response to the financial crisis. Under Obama's Justice Department, for example, no high-level bankers went to jail or faced criminal charges for actions that led to the financial crisis. And liberal critics slam Obama's economic team for focusing too heavily on bailing out banks after the crisis, and allowing the foreclosure crisis to fester.
It is unclear how Obama will push through additional Wall Street reforms. He has limited oversight of rule-making, and banking legislation is not likely to get through the current sharply divided Congress.
That's just a sampling of the many compliments paid to former Wall Street defense lawyer Mary Jo White in January 2013, when President Barack Obama nominated her to run the Securities and Exchange Commission (SEC), a major banking watchdog. But after more than a year in charge, White hasn't lived up to the hype, instead crafting weak regulations, delaying new rules to rein in the industry, and granting special privileges to a bank involved in fraud.
Rule-making is slow as molasses: Cracking down on individual banks is important, but in order to prevent another financial crisis, the SEC needs to address broader problems in the financial system. The commission is supposed to do that by crafting provisions of the 2010 Dodd-Frank financial reform law into scores of enforceable rules. White promised she would prioritize finishing up these regs, but rule-making at the SEC has slowed to a crawl since she took the helm of the agency. Over the past year, White has pushed back expected completion dates on 64 percent of rules. Contrast this with the progress made by the Commodity Futures Trading Commission (CFTC), another federal Wall Street regulator with similar jurisdiction, which has finished writing nearly all of its Dodd-Frank rules.
"We should've gotten a lot of these rules done already," an SEC official told the Financial Times in May. "By delaying and delaying, someone else is winning and it's not the people fighting for reform."
Republican obstruction isn't to blame. There are five commissioners at the SEC who vote to approve new regulations. Three of them, including White, are Democrats. That means White should be able to easily secure a majority of votes in order to finish up all those rules. That she hasn't done so suggests she doesn't want to, financial reformers argue. When she was confirmed to head the SEC, White said she would make sure Dodd-Frank regulations didn't impose "unnecessary burdens" on financial firms. Last July, former CFTC chair Gary Gensler told Bloomberg that White and Treasury Secretary Jack Lew seemed more like banking lobbyists than federal regulators when they met with him to talk about how banking rules should apply to US firms' overseas branches.
Rules that the SEC has finalized are full of loopholes: The few regulations that the SEC has completed over the past year are "weak," says Marcus Stanley, the policy director at Americans for Financial Reform. A measure the SEC finalized about a year ago, for example, makes it easier for start-ups to go public, but it does not contain enough protections for investors, Stanley says. And reformers say that a rule the SEC finished up last fall, which was supposed to curb abuses in certain parts of the bond market, has a number of crucial loopholes.
Regulations in the works are toothless, too: The rules the SEC is still hammering out are also disappointing, progressives say. A measure the SEC started working on before White's time, for instance, is supposed to ensure that credit rating agencies—companies that rate financial firms' ability to pay back debt—stop the sloppy ratings practices that led to the financial crisis. Reform advocates say White could improve the "ineffective" rule before the commission votes on it, but she hasn't made a move to do that. The SEC is also considering adding new exemptions to an already weak proposed rule governing certain types of mutual funds.
The agency dropped a corporate political spending measure: Last November, White nixed a much-touted initiative to require corporations to disclose their political spending.
White voted to give special privileges to a bank accused of fraud: In another business-friendly move in April, White voted with the two Republicans at the SEC to give special benefits to the Royal Bank of Scotland (RBS), despite the fact that the bank recently plead guilty in connection with an interest rate-rigging scandal. The SEC allowed RBS to raise money by offering securities without waiting for approval from the agency, even though companies that break the law are supposed to be denied this benefit. Democratic commissioner Kara Stein slammed the decision, noting that "we repeatedly relieve [firms] of the supposedly automatic consequences of their misconduct."
An SEC official maintains that the SEC "continues to vigorously pursue all aspects of its mission," and notes that the agency has completed several rules, including the massive Volcker rule, which limits the risky trading by commercial banks that helped lead to the financial crisis.
"Excellent. Job well done," counters a congressional Democratic aide. "We haven't seen much since."
On Monday, the Supreme Court ruled that most private companies are not required to provide contraceptive coverage to their employees, as mandated by Obamacare. Four years after the high court ruled that corporations have free speech rights in its controversial Citizens United decision, the decision gives broad new privileges to corporations, granting them religious rights for the first time.
More MoJo coverage of the Supreme Court's Hobby Lobby decision.
The decision in Sebelius v. Hobby Lobby Stores Inc., the most closely-watched case of the year, says that certain companies—those with more than half of their stock owned by fewer than five people—do not have to adhere to the Obamacare mandate that employee insurance plans cover birth control, if the owners have a religious objection. This 5-4 ruling applies to about 90 percent of all American businesses, and 52 percent of America's workforce.
The majority decision, written by Justice Samuel Alito, held that if Hobby Lobby's owners believe that the contraceptives at issue cause abortions, the mandate is a burden on their religious beliefs: "[W]e must decide whether the challenged…regulations substantially burden the exercise of religion, and we hold that they do," Alito wrote. "The owners of the businesses have religious objections to abortion, and according to their religious beliefs the four contraceptive methods at issue are abortifacients."
Last week, House Republicans voted to protect companies that steal workers' wages.
According to the Department of Labor, many big firms that receive hundreds of millions of dollars a year in federal contracts—including Hewlett Packard, AT&T, and Lockheed Martin—have a history of wage theft. Wage theft refers to employer practices such as not paying overtime, paying employees with debit cards that charge usage fees, or requiring workers to arrive to work early to get ready without paying them for that extra time. On Thursday, House liberals introduced an amendment to a defense spending bill that would forbid the government from handing out contracts to companies that jack their employees' pay. The amendment barely passed, with 25 Republicans voting with Democrats in favor of the measure. But most GOPers—204 of them—voted against the change. (The full list is below.)
The Congressional Progressive Caucus (CPC), a group of about 70 liberal Dems in the House, has introduced the same anti-wage-theft amendment to other spending bills in recent weeks, in the hope that it will make it into the final version of one of those spending bills and be signed by President Barack Obama.
Last week, a top GOP House candidate in Washington state compared gay marriage to polygamy.
"Marriage is something more for religion to decide," Republican front-runner Pedro Celis said Thursday when asked about his stance on same-sex marriage at a GOP candidate forum, the Seattle Times reported. "Is this marriage or not? Polygamy—is it fine or not? It's a religion thing."
The National Republican Congressional Committee has backed Celis, a former Microsoft engineer, to run against Democratic Rep. Suzan DelBene in Washington's first congressional district. DelBene is expected to hold onto her seat in November, but national Republicans are trying extra hard to change that. The NRCC recently bumped Celis into the highest tier of its candidate recruitment and training program. Celis is now a "Young Gun," meaning that the committee considers him to be on a "clear path to victory."
In 2012, Celis voted against Washington's initiative to legalize gay marriage. He says same-sex marriage issues are best left to the states.
Celis wasn't the only one to express interesting views on same-sex marriage at Thursday's event. Another GOP contender, former county council staffer Ed Moats, said "homosexual marriage" is "anthropologically regressive." The Republican primary will be held on August 5.
Before this event, Celis had said his campaign was focused on Obamacare and jobs.