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Warren pitches ideas for stronger Wall Street curbs

Senator Elizabeth Warren.Chip Somodevilla//Getty Images

Massachusetts Senator Elizabeth Warren wants to limit to just one the number of deals financial institutions accused of wrongdoing can cut with the government, a change that she believes would force corporations to follow the rules or face criminal charges.

It’s among several new ideas that Warren unveiled in a speech at the National Press Club on Wednesday. The senator offered new initiatives that would require banks to par far higher “mandatory minimum” fines when they avoid prosecution after violating rules. She also suggested a tax incentive aimed at prodding highly leveraged banks to use capital to finance deals rather than debt.


Warren does not yet have accompanying legislation for her new proposals. But the senator’s ideas tend to be quickly embraced by the progressive wing of the Democratic Party. On the campaign trail Democratic frontrunner Hillary Clinton is echoing Warren’s language on student loans and income inequality, two of the Massachusetts senator’s signature issues. Clinton’s new talking point that “the deck is stacked” in favor of the wealthy is awfully similar to Warren’s signature “the game is rigged.”

Warren’s speeches have also earned her ire from Wall Street. JP Morgan and Citigroup reportedly threatened to withhold campaign donations to Senate Democrats unless she tones down her rhetoric on breaking up banks. It’s a fight she embraces – Warren raised more than $100,000 in small donations for her campaign after Reuters reported the threat.

In Wednesday’s speech, to the Hyman P. Minsky Conference, Warren pitched increased regulations on financial institutions as a positive development for markets, rather than an inhibiting force. “We need rules,” Warren said according to prepared remarks.

Warren is proposing that companies caught breaking the rules shouldn’t have the option of entering non-prosecution agreements with the government if the company is already operating under such a deal — a two strikes you’re out strategy. The senator has frequently complained that large financial institutions aren’t prosecuted criminally for violations that cost taxpayers billions of dollars, and instead cut deals with government lawyers.


“These kinds of agreements were originally created to deal with low-level, non-violent individual offenders,” Warren said. “They have now been transformed beyond recognition to create get-out-of-jail-free cards for the biggest corporations in the world.”

She also wants to see the fines banks pay for wrongdoing vastly increased. A firm that benefits from a non-prosecution agreement should pay “fines at least equal to every dime of profit generated as a result of their illegal activity,” Warren said.

Warren offered an alternative to an Obama Administration plan that would encourage banks to finance projects or trades via capital rather than debt. Her proposal would attack the tax benefits that banks currently receive on when they make interest payments. Banks that are “highly leveraged” wouldn’t be able to deduct those payments from their taxes.

“After the crisis, there was near-universal agreement that big banks needed to be more capitalized and less leveraged,” Warren said, according to prepared text. “But our tax code pushes these banks in the exact opposite direction.”

Annie Linskey can be reached at annie.linskey@globe.com.