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Regulation and Compliance > Federal Regulation > SEC

Presidential Candidate O’Malley Unleashes Wall Street Crackdown Manifesto

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Presidential candidate Martin O’Malley issued a 10-page manifesto Thursday promising tougher regulations on Wall Street to help prevent another financial crash, including instituting a “revolving door” ban at regulatory agencies as well as requiring the Securities and Exchange Commission’s enforcement director to be a presidential nominee and doubling the agency’s budget.

O’Malley writes in his paper, “Protecting the American Dream from Another Wall Street Crash,” that both the SEC and Department of Justice “have fallen down on the job of enforcement — sending a message to Wall Street that they are ‘too big to jail.’”

Stronger enforcement against Wall Street, O’Malley writes, can be achieved by “appointing people to key positions who will take financial regulation seriously.”

O’Malley also said he’d introduce Glass-Steagall Act-like legislation to separate commercial banking from investment banking, as the Volcker Rule, “sometimes referred to as ‘Glass-Steagall Lite,’ is excessively complex, providing too many opportunities for banks to exploit loopholes and ambiguities.”

Sen. Elizabeth Warren, D-Mass., reintroduced Tuesday her 21st Century Glass-Steagall Act to rein in banks’ risky behaviors by reinstating certain Glass-Steagall Act protections that were repealed in 1999 by the Gramm-Leach-Bliley Act.

The former Maryland governor maintains that the DOJ and SEC have been “over-reliant on financial settlements for institutions that break the law. Settlements, even those in the billions of dollars, are not appropriate deterrents for institutions with trillions of dollars of assets.”

The SEC chair’s discretion to appoint the agency’s enforcement director has led to “the indefensible practice of appointing both Wall Street in-house lawyers and their outside lawyers to this critical position,” O’Malley argues. He vowed to “elevate this position to presidential appointee,” requiring “this critical appointment to face greater scrutiny and transparency, along with a public vote from the U.S. Senate.”

Calling the SEC and Commodity Futures Trading Commission “woefully underfunded in recent years,” O’Malley also pledged to double the SEC’s $1.7 billion budget to $3.4 billion and boost the CFTC’s budget from $322 million to $644 million.

Among O’Malley’s other priorities would be to end the days of “neither admit nor deny,”as he says the SEC “continues to allow institutions that break the law to avoid admitting guilt for their actions.”

The largest banks like JPMorgan Chase, Citigroup, Barclays, UBS and the Royal Bank of Scotland also “continue to break the law,” O’Malley said, because they’ll face “nothing more than a slap on the wrist” because “enforcement agencies have relied almost exclusively on settlements as a punitive measure.”

He said he would strengthen the largest banks’ capital reserve requirements by mandating that institutions with more than $500 billion in assets have capital reserves of not less than 15%.

— Check out Sen. Warren Reintroduces Bill to Restore Glass-Steagall on ThinkAdvisor.


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