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2020 Election Scorecard #3 Results

Category #3 Results: End Too-Big-To-Fail & Bailouts, Prevent the Next Crash & Protect Taxpayers

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Does the candidate have a plan to:

3a. Have a Plan to End Too Big To Fail?

Candidates will have different plans to address the many challenges that face our country, such as climate change, the student loan crisis, and the cost of health care.  But it is just as important for candidates to have a clear, specific and comprehensive plan to rein in the Too Big To Fail financial firms and ensure that Wall Street is never again in a position to threaten the economic collapse of the country unless they receive tens of trillions of dollars in government support and taxpayer bailouts.  Worse, the 2008 crash diverted funding away from the country’s priorities to bailing out Wall Street, which also resulted in those priorities being underfunded for decades as the deficit and debt skyrocketed due to those bailouts.

We evaluate the candidates based on their plan to end Too Big To Fail, protect taxpayers, head off the next financial crisis and protect funding for America’s priorities. Back to top

3b. Protect the financial system from the threat of derivatives, which Warren Buffett called “financial weapons of mass destruction?”

Derivatives are often complex financial instruments based on obscure valuations that were a key part of causing and spreading the 2008 financial crisis.  The most reliable way to ensure that these complex financial products are not the cause of an even greater financial crisis in the future is by requiring transparency, accountability and oversight throughout derivatives markets and activities.  Among other things, this should result in much greater competition that breaks the current oligopoly of a handful of taxpayer-backed dealer banks.  In addition, margin must be posted for all derivatives and virtually all must be exchange traded and cleared.

We evaluate the candidates based on their plan to effectively oversee the derivatives market and ensure these risky financial products are not allowed to cause or contribute to the next crash. Back to top

3c. End the rating agencies’ conflicts of interest to ensure they are accountable for bad ratings given to risky investments?

Rating agencies are supposed to independently evaluate financial products and assign them a letter-grade to indicate their level of risk, from the highest quality of Triple AAA to junk-level status. But the rating agency process is corrupted and polluted by conflicts of interest that too often result in ratings that are not independent, not accurate and not reliable.  The primary conflict arises from the “buyer pays” model where the rating agencies are selected and paid by the very companies that create and sell the financial product to the public.  In other words, the agencies are supposed to be independent referees providing information to the financial product customer but are paid by one of the teams playing the game, i.e., the issuer.  The existing ratings agency model must be thoroughly reformed to restore integrity, credibility and impartiality to this vital process and role.

We evaluate candidates based on their support for efforts to reform the ratings agency system. Back to top

3d. Enact the Volcker Rule ban on risky proprietary trading, to stop banks from gambling with taxpayer-backed deposits?

The Volcker Rule is supposed to prohibit Wall Street banks from engaging in risky proprietary (“prop”) trading, which is too often done with taxpayer-backed depositors’ money.  The rule was enacted to put an end to the banks’ “heads we win, tails you lose” activities: when their speculative bets are profitable, they pocket huge bonuses; when the bets go bad, taxpayers are handed the bill to prevent losses to depositors.  The Volcker Rule prohibits these prop trades and puts a stop to the most risky, bonus-focused trading on Wall Street.

We evaluate the candidates based on their positions regarding the Volcker Rule and the efforts to gut, weaken or kill it. Back to top