The former New York City mayor released a tougher-than-expected Wall Street reform plan Tuesday that calls for restoring some of the post-crisis financial guardrails "gutted" by President Donald Trump.
Bloomberg, who has deep ties to Wall Street and made a fortune selling technology to banks, wants to fortify the Volcker Rule, reinstate consumer protections overturned by the Trump administration, bolster the Elizabeth Warren-inspired Consumer Financial Protection Bureau, fight corporate crime by creating a dedicated group at the Justice Department and require companies to report climate change risks.
Keep in mind that Bloomberg's name is synonymous with Wall Street. His company sells terminals that allow sophisticated investors to keep a finger on the pulse of financial markets. And Bloomberg News airs on trading floor television screens throughout Wall Street.
As expected, he does not support the sweeping changes embraced by more progressive rivals such as Bernie Sanders, who wants to break up big banks and has vowed to be a "nightmare" for Wall Street.
Yet Bloomberg's more moderate stance is an acknowledgment that Americans need greater protections from the financial system and calls Trump out for softening the rules.
"Bloomberg's proposals are not as progressive as the Sanders and Warren plans, but they are undoubtedly more progressive than anyone expected when Bloomberg announced his candidacy," said Isaac Boltansky, director of policy research at Compass Point Research & Trading.
Backs financial transaction tax, stress tests
Somewhat surprisingly, Bloomberg is backing a financial transaction tax on stock and bond trades. The tax of 0.1% on all financial transactions, along with a speed limit on trading, is aimed at curbing "predatory behavior" and reducing the risk of destabilizing flash crashes.
Bloomberg also called for regulators to toughen stress tests, reinstate annual living wills for big banks and reverse the decline in equity levels at financial institutions.
And the billionaire called out "unscrupulous brokers and lenders" who "trap people in financial products that leave them worse off."
Bloomberg also wants to merge Fannie Mae and Freddie Mac, the government-owned housing behemoths, into a single entity.
"The financial system isn't working the way it should for most Americans," Bloomberg said in a statement. "President Obama made important progress strengthening our financial system and protecting consumers -- but President Trump has spent the last three years gutting those safeguards."
Bloomberg has in the past defended Wall Street, appearing to shift the blame for the 2008 meltdown to lawmakers and borrowers.
"It was not the banks that created the mortgage crisis," Bloomberg said in 2011. "It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp."
The plan is not as moderate as some in the market had been expecting from the billionaire and reflects the desire among Democratic voters to take a tough stance on Wall Street.
Jaret Seiberg, policy analyst at Cowen Washington Research Group, urged investors not to be unnerved by Bloomberg's proposals, which he described as a "mainstream Democratic plan for big banks and Wall Street."
"We would caution against overreacting," Seiberg wrote in a note to clients Tuesday. "Bloomberg understands markets, which makes it less likely that he would push policies that could hurt the economy."
'Less hospitable environment'
When he took office, Trump vowed to "do a big number" on the post-financial reform law known as Dodd-Frank.
Financial watchdogs warned against Trump's efforts to unshackle America's banks. For instance, Sheila Bair, the former chairwoman of the FDIC, told CNN Business last year that now is the worst time to dismantle these financial safeguards.
Yet some bankers argue that the amount of actual deregulation has not lived up to the hype. Most of Dodd-Frank remains intact today.
Better Markets, a nonprofit that supports greater Wall Street regulation, applauded Bloomberg's efforts to target corporate crime, strengthen the CFPB and toughen the Volcker Rule.
"Those are all excellent things that need to be done," Dennis Kelleher, the CEO of Better Markets, said in an interview.
Bloomberg's stance shows Wall Street that it should be bracing for tougher regulation should Trump lose in November.
"No matter which of the Democrats wins, it will be a less hospitable environment for banks and financial services firms," Compass Point's Boltansky said. "All we're doing is discussing the degree to which the pendulum will swing back."
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February 19, 2020 at 12:30AM
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