On Tuesday Michael Bloomberg, U.S Democratic presidential candidate outlined an extensive financial services policy proposal to rein in Wall Street trading, increase Americans’ access to banking services, boost consumer protections and crack down on financial crime.
The left-leaning platform marks a striking turnaround for the former Republican New York mayor and Wall Street investment banker who made his $60 billion fortune in financial services and in the past has criticized reforms introduced following the 2007-2009 financial crisis.
Bloomberg’s campaign argued on Tuesday that “as the founder of a successful global financial technology company, he understands the system well and is uniquely qualified to make it work better for all Americans.”, trying to make a virtue of his Wall Street heritage.
Among the most appealing proposals are a tax of 0.1% on transactions in stocks, bonds and payments on derivative contracts, strengthening the “Volcker Rule” ban on banks’ proprietary trading and setting a trading speed limit – all of which take aim at Wall Street clients of Bloomberg Inc’s trading terminal.
The proposal also makes a solemn promise to reinforce protections eroded by the Trump administration by toughening banks’ annual health checks, boosting bank capital levels and taking back the curbing payday lending from Consumer Financial Protection Bureau’s rules and its ban on imposing mandatory arbitration on consumers.
Bloomberg also waded into the long-running debate on the future of housing finance giants Fannie Mae and Freddie Mac, which were bailed out during the financial crisis. He proposed to merge them to ensure taxpayers are fully compensated for the risks of guaranteeing the firms’ securities.
While Bloomberg’s platform underscores how far the Democratic Party is moving to the left on financial and corporate policy issues, it does not go as far as proposals backed by progressive rival presidential candidates Bernie Sanders and Elizabeth Warren, who have called for big banks to be broken up.
Bloomberg, a latecomer to the race who has so far spent $188 million of his own money on the campaign, on Wednesday will step onto the Democratic debate stage for the first time after exceeding the double-digit polling threshold set by the Democratic Party, with 19% support.
“Our sense is that these proposals are primarily intended to blunt progressive attacks, especially with Bloomberg joining the debate stage for the first time on Wednesday evening,” Isaac Boltansky, director of policy research at Washington-based Compass Point Research & Trading, said in a note.
“But the overarching tone of the proposals underscores the populist shift in the Democratic party and the heightened potential for significant policy shifts.”
Bloomberg has previously proposed major tax hikes on the wealthy, including a higher capital gains rate and a 5% surtax on annual incomes that exceed $5 million. His latest proposal would curb debt collection agencies and bank overdraft fees. The proposal addresses the student loan crisis by automatically enrolling undergraduate students in income-based repayment plans, installing caps on debt payments as well as making it easier to discharge student debt via bankruptcy.
Touching on a key theme of Sanders and Warren, Bloomberg also proposed measures to boost Americans’ access to the financial system by offering a range of banking services through the U.S. Postal Service and launch a pilot program for free or nearly no-cost bank accounts.
Adopting another familiar Democratic idea, Bloomberg proposed a new “corporate crime” team at the U.S. Department of Justice that would be discouraged from using non-prosecution agreements, which impose fines without criminal charges.
The proposals, specifically a transaction tax, are most likely to a produce a strong pushback from the financial lobby, which is already fighting aggressively to rebut the idea. Such a tax was rejected by the Obama administration, but it has gained traction in Democratic circles in recent years.
The tax would be phased in gradually, starting at 0.02%, to “minimize any unintended consequences.” under Bloomberg’s plan.
Ken Bentsen, CEO of the Securities Industry and Financial Markets Association, said a transaction tax would hurt middle class savers and retirees.
“At a time when market development, efficiency and competition are driving the cost of investing toward zero, it makes little sense to increase the cost through what is essentially a sales tax. Further, the threat such a tax poses to the efficiency of the U.S. capital markets is real. It begs the question, ‘What’s the point?’”
Bloomberg began his career at investment bank Salomon Brothers, where he became a partner before later being laid off amid a company merger. He subsequently founded the financial information and media giant Bloomberg, whose desktop terminal is synonymous with Wall Street trading.
Many Democratic-leading financiers had seen Bloomberg as a safe pair of hands and on Tuesday some analysts played down the risk his presidency would pose to the industry.
“To win, a Democrat needs a plan to focus on big banks,” said Cowen Washington Research Group analyst Jaret Seiberg in a note “Bloomberg understands markets, which makes it less likely that he would push policies that could hurt the economy.”
Reporting by Joseph Ax and Michelle Price
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