Calling the Candidates Out on Financial Reform

Two years ago, the Dodd-Frank and Affordable Care acts of 2010 were widely regarded as the biggest accomplishments of the Obama administration and the 111th Congress. Why, in the presidential race of 2012, do we hear so much about the first and so little about the second?

When he signed Dodd-Frank into law, President Barack Obama said it would not only “put a stop to a lot of the bad loans that fueled a debt-based bubble” but also “rein in the abuse and excess that nearly brought down our financial system.”

Mitt Romney promised to repeal the statute: writing tough rules for the financial sector, he explained, was like “pouring molasses” on the economy.

More recently, neither man has had a great deal to say about financial reform or about the continuing backroom battles over new restraints on derivatives trading, the independence of the new Consumer Financial Protection Bureau, and the implementation of the so-called “Volcker rule,” among other issues.

Hoping to draw the candidates out on these matters, Americans for Financial Reform sent a list of ten proposed questions to the moderators of the debates that get underway next Wednesday night in Denver, Colorado.

1. Should the Dodd-Frank Wall Street reform law be implemented or repealed? If you’d like to see it repealed, what would you do instead? Can you point to any particular pieces of the law that you would keep?

2. One of the centerpieces of Dodd-Frank was an effort to regulate the shadowy world of derivatives – the bet-like securities that played a huge role in bringing on the 2008 financial crisis by spreading the risks of bad mortgages to financial institutions around the world. Do you support or oppose current efforts to exempt substantial areas of the derivatives market from new regulations?

3. A number of former bankers, including Citicorp creator Sandy Weill, now argue for breaking up the big banks and restricting those with taxpayer insurance to relatively safe and traditional loan-making activities. What is your view?

4. The Dodd-Frank Act created a Consumer Financial Protection Bureau? Do we need a financial regulator whose focus and mission is consumer protection? What is your position on congressional proposals to limit the CFPB’s funding or independence?

5. Do you support the Volcker rule, which prohibits taxpayer-insured banks from engaging in excessively risky practices such as investing in hedge funds or trading derivatives?

6. Have the Justice Department and other federal law enforcers done enough to investigate and prosecute the bankers and lenders whose actions led to the financial meltdown? If not, what steps would you take to energize these efforts?

7. From the bailouts to financial reform, members of Congress on both sides of the aisle have said that Wall Street wields too much influence in Washington? Do you agree? If so, what would you do to reduce its political clout?

8. Financial sector profits account for nearly 30 percent of all corporate earnings, double the proportion of a few decades ago. Should this be a source of concern? What can be done about it?

9. Do you favor a financial transaction tax, or FTT, that would fall largely on high-speed traders and speculators? Proponents say that a small fee spread over many transactions could generate several hundred billion dollars a decade in revenue, limit high-speed trading and volatility, and help restore a long-term perspective to the investment world. Opponents argue that an FTT would interfere with market liquidity.

10. Do you agree with those who point to a financial-sector pattern of extravagant pay linked to short-term profits or stock gains as one of the drivers of the financial meltdown? What if anything should the federal government be doing about this problem?