WASHINGTON — Senator Elizabeth Warren on Thursday escalated her long battle with Wall Street, calling for new rules to curtail the private equity industry by making firms responsible for the debts and other obligations of the companies they purchase, and changing tax rates and loopholes that aid them.
Accusing the industry of “legalized looting,” Warren castigated private equity firms for lining their pockets even when the companies they purchase fail, connecting the issue to the growth of corporate profits and the stagnation of wages in the American economy.
“Far too often, the private equity firms are like vampires — bleeding the company dry and walking away enriched even as the company succumbs,” Warren wrote in a Medium post announcing her plan. “Washington has done little to rein these firms in or to ensure that their incentives align with the best interests of the economy.”
The Massachusetts Democrat and presidential candidate called for a litany of legal changes that would hold private equity firms accountable for debts and some pension obligations of companies they purchase, take away their ability to pay themselves large fees, curtail risky loans to private-equity-owned companies already in debt, and more. The changes would be enacted through a bill that was released by her Senate office on Thursday morning — although the likelihood of getting the legislation through the Republican-controlled Senate is slim-to-none.
“Firms that make bad investments would be held accountable instead of walking away from the wreckage with millions in fees and payouts,” Warren wrote. “My plan would stop one of the main sources of Wall Street looting.”
Warren has built buzz and support for her presidential campaign with a dizzying array of detailed policy plans. This one is is the latest in a raft of proposals she has termed “economic patriotism,” which call for more forceful intervention in the economy to benefit American jobs and workers. While Warren’s specific prescription for private equity firms is new, the broader proposal is built around her long-held criticisms of Wall Street — and her accusation of Washington’s complicity in its excesses — that have powered her rise in politics.
“For a long time now, Wall Street’s success hasn’t helped the broader economy – it’s come at the expense of the rest of the economy,” Warren wrote. “Wall Street is looting the economy and Washington is helping them do it.“
The proposal also could underscore Warren’s disagreements with Democrats just as she is making the case for the party’s primary voters to unite around her. Referring to last year’s rollback of the 2010 Dodd-Frank bill, which created new banking rules after the financial crisis, Warren noted in her Medium post “one of the only major bipartisan bills that Donald Trump signed has gutted important rules checking some of the country’s biggest banks.”
During the fight over that rollback, Warren used an e-mail to her supporters to call out fellow Democrats who were planning to support it, some of whom were in the middle of tough reelection battles. Warren’s team said that was consistent with her approach of siding with working people over the financial industry; but staffers of those senators chided hers and some on Capitol Hill said the bad blood hadn’t dissipated a year later.
Many Democrats draw significant fundraising from Wall Street, but Warren’s broadsides against the financial industry have made it more difficult for her to raise money from employees of large banks and investment companies.
A Globe search of campaign filings found Warren received close to $19,000 in itemized donations from employees of three dozen prominent banking, investment, and other financial firms for her presidential campaign through June 30, less than any other top-tier Democratic presidential candidate. Vermont Senator Bernie Sanders drew just slightly more than Warren from that group, while Senator Kamala Harris from California led the field with more than $100,000. The figures are likely incomplete because campaigns are only required to report donations or more than $200 or more and employer names are not always consistently reported on campaign filings.
In her new plan, Warren also called for the passage of her updated Glass-Steagall Act, to prevent taxpayer subsidies to commercial banks from being used to protect investment banks that merge with them. She also called for regulators to enact new executive compensation rules that discourage excessive risk-taking and for the reversal of Trump-era rollback on banking regulations.
“Trump-appointed regulators have chipped away at the rules for big banks, asserting that they limit the potential for economic growth and hoping that nobody understands these technical rules well enough to push back. Well I do understand them,” Warren wrote. “I know that these rules not only make the financial system safer, but also channel big bank activity into more economically productive ends.”
Warren also renewed her calls for “postal banking,” in which post offices would work with local banks to provide simple financial services at low fees, and called for the Federal Reserve to make updates so paychecks clear faster.