Wall Street Takes a Hit in Democratic Party’s Platform Draft

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A pedestrian walks past the Wall Street subway station in New York on May 27, 2016.

Photographer: Michael Nagle/Bloomberg
  • New taxes, $15 minimum-wage call a nod to socialist Sanders
  • Presumptive nominee Clinton looking to solidify left flank

Wall Street was hit hard in the latest draft of the Democratic Party’s platform, which reflected the influence of Bernie Sanders by taking a sharp leftward turn from 2012 on a range of issues, from regulation and taxes to support for a $15 minimum wage.

The 35-page document, hammered out in drafting sessions in St. Louis, reflects a delicate and as yet untested balancing act by presumptive Democratic presidential nominee Hillary Clinton as she seeks a unified position on contentious issues ranging from wages to oil drilling to the Trans-Pacific Partnership trade deal.

QuickTake Too Big to Fail

As U.S. senator who represented New York for eight years, Clinton cast herself as an ally of Wall Street, an important local industry. The platform, with its nod to “extreme levels of income and wealth inequality,” suggests the extent to which that image has been a weakness -- exploited on the left by Sanders, her rival for the Democratic nomination, and on the right by Donald Trump, her presumptive Republican competitor.

Platforms are mostly symbolic, having no formal hold over a candidate and often not corresponding closely with policy actions pursued later by the new administration. This time may be different, though, given the upheaval over the direction of the Democratic party sparked by Sanders’s campaign, according to Democratic strategist Jim Manley, a senior director at QGA Public Affairs in Washington.

‘Much More Progressive’

“History shows these things aren’t worth the paper they are printed on,” said Manley. “But this platform is indicative of a much more progressive party than we’ve seen in years past.”

On Sunday, Sanders demanded more. “This is a document that needs to be significantly improved,” Sanders wrote in a column for the Philadelphia Inquirer. “There were a number of vitally important proposals brought forth by the delegates from our campaign that were not adopted.”

“One of the most important amendments that we will offer is to make it clear that the Democratic Party is strongly opposed” to the TPP, Sanders wrote. The current draft cites “a diversity of views” among Democrats about the TPP, a sweeping trade deal involving 12 Pacific Rim countries, which was signed in February but has yet to be ratified by Congress.

Final Draft

The party’s full platform committee will meet in Orlando, Florida, on July 8 and 9 to approve the final draft.

If provisions in the draft platform were to become government policy a transaction tax would be imposed on high frequency and speculative trading, while financial institutions could find themselves competing in the realm of basic banking services with the U.S. Postal Service.

Although many credit Sanders with pushing the platform to the left, Maya Harris, the Clinton campaign’s official representative to the policy committee, said the document “reflects the issues Hillary Clinton has championed throughout this campaign.”

Fed Reforms

Financial-industry executives would be blocked from serving on boards of the 12 regional Federal Reserve banks, a nod to the “Fed Up” coalition pushing to make the central bank a more diverse and more public institution.

The financial sector would face new restrictions on securities trading by commercial banks. The latter provisions are hailed in the document as a 21st-century version of the Glass-Steagall Act, the Depression-era law that separated investment and commercial banking activities -- fighting words for Wall Street. Glass-Steagall was repealed in 1999 by President Bill Clinton.

Warren Gunnels, Sanders’s senior policy aide, said he was pleasantly surprised at the concession the campaign was able to wrest from the Clinton camp. “It’s been a very good working relationship,” he said.

Gunnels noted wins on the financial sector -- the platform assails “the greed and recklessness of Wall Street” -- and a range of other issues, including a call to abolish the death penalty. That was a shift from Clinton’s insistence the punishment be available to judges and juries in some cases.

Won’t Concede

Clinton had a drawn-out battle for the party’s nomination with Sanders, the independent senator from Vermont and self-described democratic socialist. Although she mathematically clinched the nomination before the final round of state primaries in June, Sanders has yet to officially concede defeat.

Gunnels declined to say whether the concessions would translate into a Sanders endorsement, and Sanders’s column on Sunday carried no hint of one.

An indication of the challenge Clinton faces in attracting many of the left-leaning Sanders backers -- who cast about 12 million votes for their candidate, to about 15.8 million who voted for Clinton -- appeared in recent national polls suggesting support for Green Party candidate Jill Stein.

The physician and activist, who also ran in 2012, received 2, 4, and 5 percent support, respectively, in three national polls released on June 30. A RealClearPolitics average of recent surveys puts Stein’s support at 4 percent in surveys that also include the Libertarian candidate Gary Johnson. In 2012 Stein, on the ballot in 37 states, won just 0.36 percent of the popular vote.

Those choosing Stein are thought to be potential lost Democratic votes that could tip the balance in a close election. At the same time, Trump has had some of his greatest fundraising support from hedge-fund leaders who feel threatened by the Democrats’ get-tough tone on Wall Street.

Tax Policy

The draft platform released late Friday moves from the big sweep of cultural issues like protection of LGBT rights to the minutiae of American tax policy. U.S. corporations would no longer be allowed to defer paying taxes on their overseas earnings -- a major component of corporate tax-avoidance strategies -- under a provision in the draft platform that borrows heavily from Sanders’s campaign.

Under current law, companies can postpone such taxes indefinitely by leaving their offshore earnings offshore; taxes are due only when the profits are “repatriated” to the U.S. As a consequence, major U.S companies have stockpiled more than $2.4 trillion in foreign profit. “We will end deferrals so that American corporations pay U.S. taxes immediately on foreign profits and can no longer escape paying their fair share of United States taxes by stashing profits abroad,” says the draft platform.

Tax Inversions

Sanders proposed ending the deferral, and using the resulting additional tax revenue to repair and build roads, bridges, railways and airports.

Sanders has said the current law impels large companies to shift as much of their profit as possible overseas, often to tax havens. Moreover, the deferral provides incentives for companies to establish factories in countries with low corporate tax rates.

Clinton’s plans haven’t gone as far as those of Sanders. One of her proposals, designed to prevent U.S. companies from shifting their tax addresses offshore via so-called inversions, is to impose an immediate “exit tax” on any offshore earnings held by companies that attempt that maneuver. Clinton also proposes to claw back certain tax breaks given to companies that subsequently send jobs overseas -- a notion that appears, in broad form, in the draft platform.

The draft platform gives another nod to Sanders in its call for “a financial transactions tax on Wall Street to curb excessive speculation and high-frequency trading.” While Clinton in 2015 proposed a tax aimed at high-frequency trading, Sanders sought a broader measure: imposing a rate of 0.5 percent for stocks, 0.1 percent for bonds and 0.005 percent for derivatives.

Clinton has specifically targeted high-frequency traders, saying they have “unnecessarily placed stress on our markets, created instability, and enabled unfair and abusive trading strategies,” according to her website. Her campaign has said it would target trading strategies that rely heavily on order cancellations.

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