Re: Glass steagall

A few thoughts on Neera's note:

1. One, I think we can blur Glass Steagall a bit more. Instead of just saying we are against, explain what aspects she is for. After all, Volker Rule is kind of designed to fend off worst mixing of banking and investing etc. Maybe she can say, I do support doing more to protect against the type risky mixing of traditional banking and Wall Street practices which Glass Steagall was designed to affect, which is why I am for strengthening the Volker Rule and doing....

2. We need to give her a more visceral hit of the complete and utter failure of the Bush Administration for crisis. So instead of giving a lecture on why 1998 law did not cause crisis (however much I want to do this!) she pivots fully on offense into a full throated hit on Bush Administration and replacing Arthur Levitt with Cox and their complete failure to regulate Wall Street. So more time on offense as to how Bush causes crisis and less time on defense.

3. Instead of being against breaking up banks based on size and explaining why risk is the key, maybe say, I am for breaking up banks before too big to fail -- only difference is I am applying two criteria: how big they are and how risky and unmanageable they are. If we just focus on size we will miss breaking up and regulating those practices that are most responsible for crisis. So again, it feel less like "no" on breaking up biggest banks, it feels more like "yes" - but here is the smart way to do it. 

So common theme on these comments is not to cave on Glass Steagall or bank size -- but to have more of a feel of agreeing but explaining why she has the smartest way to do it, as opposed to explaining why she is against. 

Sent from my iPhone

> On 11 Sep 2015, at 11:17, Neera Tanden  wrote:
> 
> i think most people know I worry that this is the closest thing to an Iraq vote we have to face us. And a big potential problem in the debate. 
> 
> Why can't she say the following:
> Too big to fail  are problems. Should never happen again etc. I will take steps - higher cap requirements, whatever you have on list -to ensure we protect Americans.  I think those will work better.  
> 
> I will work every day to make sure we protect Americans so they never suffer for the excesses on  Wall Street.  But if banks are growing too big to manage and we need to take these steps  tetc etc, believe me I will work to reinstate glass steagall in a heartbeat bc this Americans losing so much for the banks can never happen again. 
> 
> She's not conceding it was responsible for the financial crisis.  But her openness will be better than a hard and fast position that puts her on the bank side of the ledger. 
> 
> Anyway I just offer it as a thought. 

If we need words I would go with " I will work to reduce the size of the banks in a heartbeat"  or if more is needed to go with "I will work to reduce the size or even breakup the banks in a heartbeat ..." rather than a reference to reinstating Glass Steagall.  

I say this as we've already said that crisis wasn't about Glass Steagall restrictions but about risk.  Also I believe that as a policy matter that the issue about too big or too risky to fail is about size and risk not Glass Steagall.  I would prefer not to concede that point.

Further, Dodd Frank gave the FDIC and Fed to restructure or even downsize banks if the living will process leads to a conclusion that the risk of resolution is too great.

On Fri, Sep 11, 2015 at 2:37 PM, Jake Sullivan <jsullivan@hillaryclinton.com> wrote:

That’s close to what we have minus the words Glass Steagall.  Are those magic words for you?

 

From: Neera Tanden [mailto:ntanden@gmail.com]
Sent: Friday, September 11, 2015 2:17 PM
To: Jake Sullivan <jsullivan@hillaryclinton.com>; John Podesta <john.podesta@gmail.com>; Gene Sperling <gbsperling@gmail.com>; Gary Gensler <ggensler@hillaryclinton.com>; Mike Schmidt <mschmidt@hillaryclinton.com>; Michael Shapiro <mshapiro@hillaryclinton.com>; David Kamin <davidckamin@gmail.com>
Subject: Glass steagall

 

i think most people know I worry that this is the closest thing to an Iraq vote we have to face us. And a big potential problem in the debate. 

 

Why can't she say the following:

Too big to fail  are problems. Should never happen again etc. I will take steps - higher cap requirements, whatever you have on list -to ensure we protect Americans.  I think those will work better.  

 

I will work every day to make sure we protect Americans so they never suffer for the excesses on  Wall Street.  But if banks are growing too big to manage and we need to take these steps  tetc etc, believe me I will work to reinstate glass steagall in a heartbeat bc this Americans losing so much for the banks can never happen again. 

 

She's not conceding it was responsible for the financial crisis.  But her openness will be better than a hard and fast position that puts her on the bank side of the ledger. 

 

Anyway I just offer it as a thought. 

A bank too complex to manage that therefore is too risky.

On Sat, Sep 12, 2015 at 9:33 AM Jake Sullivan <jsullivan@hillaryclinton.com> wrote:

To summarize, your position would be that she would be open to reinstating glass steagall if it came to that?   What's the answer to "what's it gonna take"?

On Sep 12, 2015, at 9:09 AM, Neera Tanden <ntanden@gmail.com> wrote:

Look, I wasn't there in the 90s. But I don't think she will win a battle on glass steagall's role in the crisis. And I think it is problem. Fair or unfair it's pretty ingrained. So I'm trying to think of a third way between support and opposition. I think O'Malley will push her to be opposed and it could be really deadly.

But I'm happy to register my dissent from your views and move on.

On Fri, Sep 11, 2015 at 9:54 PM Gary Gensler <ggensler@hillaryclinton.com> wrote:

I would say no and say that this 1930's policy solution doesn't work in this century.  And it wouldn't have done anything about AIG, Lehman or many other too big to fail failures.  

Sent from my iPhone

On Sep 11, 2015, at 9:42 PM, Neera Tanden <ntanden@gmail.com> wrote:

someone follows up with
"Are you for reinstating glass steagall or not?"

Gene's artful version still gets us to no.

I am saying she says some version of I will fix the problem w out it. But if it makes sense to do bc of issues that arise - e g too much complexity to manage - then she will do it. She's not saying she will do it now. She's not saying it was responsible for the crisis. But she will reinstate if future need arises.

I guess I worry about everyone else up on the stage saying reinstate glass steagall and not giving her more.

I recognize I'm in a different place than others. You may not want to go this far, but given her anxiety on Glass Steagall I did want to offer up an alternative.

On Fri, Sep 11, 2015 at 6:00 PM Gary Gensler <ggensler@hillaryclinton.com> wrote:

I think Gene is onto a possible path forward - buying into the values of Glass Steagall - while not the actual specifics for our times.  Glass Steagall was another generations solution for a similar problem - risk - but a problem that has taken on new forms nearly 80 years later.  Obama focused and succeeded on much with Dodd Frank, but can and need to do more.  That's why I am for Risk fee, strengthening Volcker, etc. and if needed would in a heartbeat ....

On Fri, Sep 11, 2015 at 5:02 PM, Gene Sperling <gbsperling@gmail.com> wrote:

I want to come back to my comment that was somewhat between Neera and Gary.

I agree with Gary that we should not flip flop on Glass Steagall because one, it is make-believe to think it caused the crisis in any way; 2) because it is make believe, it is crazy for her to buy into the idea that it was her husband as opposed to a Republican Administration bore the regulatory responsibility for the worst financial crisis in our life time.

But where we could think more, is how without buying into the Glass-Steagall as cause and cure line -- we could find ways to blur a little more going forward, that could use the two words.

Such as: "I do want to strengthen some of the key protections against risky behavior that Glass Steagall was designed to prevent -- which is why I want to strengthen Volker Rule etc. And I want to make sure we never see the type of let Wall Street do whatever they want like took place under George Bush.....[and then hit a litany]

That structure has us not focusing on being against Glass Steagall, but quickly buys into some of the values going forward and then pivots to an all out hit on Bush and reckless practices under Bush watch that led to crisis......"

Thoughts?

On Fri, Sep 11, 2015 at 1:42 PM, Gary Gensler <ggensler@hillaryclinton.com> wrote:

I understand  what Neera is saying that Glass Steagall is not well understood by the public, but I would still have HRC keep to that her focus is on risk.  That's why we have the risk fee, strengthening Volcker and Shadow Banking and if desired add that she would not hesitate to hold banks accountable and not hesitate if need be to downsize or even break some of them up.  On Glass Steagall, it's far more than just not conceding it.  I think that particularly given what HRC has said and that Lehman, AIG and so many others would have failed even with Glass Steagall that HRC is on safer grounds talking about risk and even size than what lines of business banks are in.  It appears a bit flip floppy whereas the risk and size are far less so.  

On Fri, Sep 11, 2015 at 3:47 PM, Neera Tanden <ntanden@gmail.com> wrote:

Where I'm disagreeing with this group is precisely on the words Glass Steagall.  No one knows what it is, but being on the wrong side of it is dangerous.  So I'm not committing her to reinstate it, but I also think shutting it down is ill advised; I fear that in the black and white world we're living in, that is shorthanded as pro-bank.  So that is why I would remain open to it as a policy option in the future. 

 

 

On Fri, Sep 11, 2015 at 2:58 PM, Gene Sperling <gbsperling@gmail.com> wrote:

Very much agree

Sent from my iPhone

On 11 Sep 2015, at 11:53, Gary Gensler <ggensler@hillaryclinton.com> wrote:

If we need words I would go with " I will work to reduce the size of the banks in a heartbeat"  or if more is needed to go with "I will work to reduce the size or even breakup the banks in a heartbeat ..." rather than a reference to reinstating Glass Steagall.  

I say this as we've already said that crisis wasn't about Glass Steagall restrictions but about risk.  Also I believe that as a policy matter that the issue about too big or too risky to fail is about size and risk not Glass Steagall.  I would prefer not to concede that point.

Further, Dodd Frank gave the FDIC and Fed to restructure or even downsize banks if the living will process leads to a conclusion that the risk of resolution is too great.

On Fri, Sep 11, 2015 at 2:37 PM, Jake Sullivan <jsullivan@hillaryclinton.com> wrote:

That’s close to what we have minus the words Glass Steagall.  Are those magic words for you?

 

From: Neera Tanden [mailto:ntanden@gmail.com]
Sent: Friday, September 11, 2015 2:17 PM
To: Jake Sullivan <jsullivan@hillaryclinton.com>; John Podesta <john.podesta@gmail.com>; Gene Sperling <gbsperling@gmail.com>; Gary Gensler <ggensler@hillaryclinton.com>; Mike Schmidt <mschmidt@hillaryclinton.com>; Michael Shapiro <mshapiro@hillaryclinton.com>; David Kamin <davidckamin@gmail.com>
Subject: Glass steagall

 

i think most people know I worry that this is the closest thing to an Iraq vote we have to face us. And a big potential problem in the debate. 

 

Why can't she say the following:

Too big to fail  are problems. Should never happen again etc. I will take steps - higher cap requirements, whatever you have on list -to ensure we protect Americans.  I think those will work better.  

 

I will work every day to make sure we protect Americans so they never suffer for the excesses on  Wall Street.  But if banks are growing too big to manage and we need to take these steps  tetc etc, believe me I will work to reinstate glass steagall in a heartbeat bc this Americans losing so much for the banks can never happen again. 

 

She's not conceding it was responsible for the financial crisis.  But her openness will be better than a hard and fast position that puts her on the bank side of the ledger. 

 

Anyway I just offer it as a thought. 

First I would expect Biden to endorse glass steagall if he gets in. What do we think he and warren were discussing for the hour? But we will know something Ike that hopefully before the debate. But it would be my bet that he ends up in favor.

To answer Gary's email, we have an essential conundrum. Glass Steagall has become shorthand for tough on the banks with the left. Again, I'm not saying it's fair or unfair. It just seems very hard to undo in the time we have. So we can say all these things you'd like her to say but when she says she's against reinstating on that debate stage I am worried that will be shorthanded as she's pro-bank.

We all have different discussions about policy with different people and different assessments. But a lot of people see an ftt as a criticism of Wall Street simply by being a tax on stocks. Though I'm all for making brokers pay it. It's not like people are super distinguishing the banks, hedge funds and Wall Street.

But hey, if she had been for reinstating glass steagall, that would create a different calculus for an ftt. Given we are not for reinstating, I think that makes an ftt even more of an imperative. And at least it gives her something to say about taking a tough stand in this realm.

Now I think I've at least properly beaten this dead horse for my part.

On Sat, Sep 12, 2015 at 12:34 PM Michael Shapiro <mshapiro@hillaryclinton.com> wrote:

This is not my area at all. So people should weight Schmidt and Pyles and Gary's views much, much more strongly. 

But my understanding is that Biden is somewhat weaker with liberals on financial reform issues. If we are worried about him entering, and drawing liberals either from us or Sanders because he's in theory more electable, I'd lean toward going stronger on financial accountability to the extent we can in a way that does not seem like a lurch but an evolution of the principles we've put out and the lessons of the crisis. 

Sent from my iPhone

On Sep 12, 2015, at 12:26 PM, Gary Gensler <ggensler@hillaryclinton.com> wrote:

+ Pyle

On Sat, Sep 12, 2015 at 12:20 PM, Gary Gensler <ggensler@hillaryclinton.com> wrote:

I think that what HRC is confronting on the rope lines when folks ask about Glass Steagall is less about the specifics of that actual law and far more that a broad part of the public think that we have a) not yet solved for the risks that Banks pose to their daily lives & b) that the banks and their executives are entitled or not held accountable as they should be.  It's a mixture of not solving both a) Too Big to Fail and b) Too Big  to Jail.  

And I have heard too often from progressive advocates some mixture of concern our positions given some mixture of a) Hillary having been a NY Senator thus close to Wall Street, b) the perceived deregulation of WJC years & c) many of Hillary donor/adviser base coming from Finance.  

For me, if we wish to address these more head on, we should consider dialing up the substance of both our risk agenda and our accountability agenda.

On risk, our current liability risk fee does tip the scales directly regarding size and risk, but it does not set any absolute limit to size, risk or complexity.  It's also pretty technical rather than a clear rule.  Dialing up, I think that we could say that Hillary is calling for strengthening the Dodd Frank provision which already allows for regulators (the FDIC and Fed) to downsize or restructure banks.  The authority is already there but by calling  for a broadening of that authority we can associate ourselves more directly wish a call to downsize banks.  We could say that the law needs to make it explicit that the regulators can downsize for risk to the economy, complexity to manage or overall size relative to the markets.  Or if we wished to dial this  knob further, we could suggest a specific number saying that given  that it is almost certain that some large systemic bank will fail we should limit their scale.

I don't, however, think that we should stress Glass Steagall or lines of business other than our call for closing some loopholes in Volcker.

For the public it's would be clear and somewhat like rules that over-sized vehicles are banned from the highways in part to protect the rest of the public from when they crash.  We could say why not protect the public from inevitable future crashes of Too big to Fail Banks.

On accountability, we could dial up the current provisions of senior executives' bonuses being on the line when large fines are paid by tweaking some of the language (making it clearer and with less defenses) and upping the rhetoric.  We could also add that regulators have clear authority to force senior executives to lose their job for misdeeds that happened under their supervision even if they didn't participate in the misdeed.

Lastly, though the FTT has been well litigated, I wanted to comment that one of the reasons I don't think  that it will get us much credit is that it does not go to either of the public's deeply held concerns.  An FTT effects markets by putting a tax on every trade.  It does not address Bank risk, Too Big to Fail, accountability or Too Big to Jail.  My view is that the debate will still focus on these items and that Hillary would still get the rope line questions. 

Gary

On Sat, Sep 12, 2015 at 10:09 AM, Neera Tanden <ntanden@gmail.com> wrote:

Yes. And the broad test is too complex to manage. But I'm obviously happy to work with others on other triggers if you don't like that one.

On Sat, Sep 12, 2015 at 9:58 AM Jake Sullivan <jsullivan@hillaryclinton.com> wrote:

I'm trying to get same answer.  What I'm trying to figure out is if you are saying, I need a glass steagall tool I can use if a bank can't meet my tests?

On Sep 12, 2015, at 9:53 AM, Neera Tanden <ntanden@gmail.com> wrote:

I would say that if there's a bank that needs to be broken up she needs a glass steagall tool to break them up. She can't really do that now.

However, I'm open to saying a pattern of too much complexity. So it's finding several banks. But I'm trying to find a debate answer not a policy rollout. Happy to think longer for that kind of answer.

Obviously she can't break up any bank on her own. The higher cap requirements are designed to assure much less likelihood of failure. We have pushed for higher ones. But we live in a quandary which is no one knows what any of this means and glass steagall has the most resonance with reporters and the like.

I get Jamie Damon's argument that having both sides of the business helped him weather the storm. They took profits and losses at different times. But I think there are some reasonable people on Wall Street who think the complexity is a problem.

On Sat, Sep 12, 2015 at 9:38 AM Jake Sullivan <jsullivan@hillaryclinton.com> wrote:

So if there is one of those we reinstate glass steagall for all banks?

Just trying to understand. 

On Sep 12, 2015, at 9:36 AM, Neera Tanden <ntanden@gmail.com> wrote:

A bank too complex to manage that therefore is too risky.

On Sat, Sep 12, 2015 at 9:33 AM Jake Sullivan <jsullivan@hillaryclinton.com> wrote:

To summarize, your position would be that she would be open to reinstating glass steagall if it came to that?   What's the answer to "what's it gonna take"?

On Sep 12, 2015, at 9:09 AM, Neera Tanden <ntanden@gmail.com> wrote:

Look, I wasn't there in the 90s. But I don't think she will win a battle on glass steagall's role in the crisis. And I think it is problem. Fair or unfair it's pretty ingrained. So I'm trying to think of a third way between support and opposition. I think O'Malley will push her to be opposed and it could be really deadly.

But I'm happy to register my dissent from your views and move on.

On Fri, Sep 11, 2015 at 9:54 PM Gary Gensler <ggensler@hillaryclinton.com> wrote:

I would say no and say that this 1930's policy solution doesn't work in this century.  And it wouldn't have done anything about AIG, Lehman or many other too big to fail failures.  

Sent from my iPhone

On Sep 11, 2015, at 9:42 PM, Neera Tanden <ntanden@gmail.com> wrote:

someone follows up with
"Are you for reinstating glass steagall or not?"

Gene's artful version still gets us to no.

I am saying she says some version of I will fix the problem w out it. But if it makes sense to do bc of issues that arise - e g too much complexity to manage - then she will do it. She's not saying she will do it now. She's not saying it was responsible for the crisis. But she will reinstate if future need arises.

I guess I worry about everyone else up on the stage saying reinstate glass steagall and not giving her more.

I recognize I'm in a different place than others. You may not want to go this far, but given her anxiety on Glass Steagall I did want to offer up an alternative.

On Fri, Sep 11, 2015 at 6:00 PM Gary Gensler <ggensler@hillaryclinton.com> wrote:

I think Gene is onto a possible path forward - buying into the values of Glass Steagall - while not the actual specifics for our times.  Glass Steagall was another generations solution for a similar problem - risk - but a problem that has taken on new forms nearly 80 years later.  Obama focused and succeeded on much with Dodd Frank, but can and need to do more.  That's why I am for Risk fee, strengthening Volcker, etc. and if needed would in a heartbeat ....

On Fri, Sep 11, 2015 at 5:02 PM, Gene Sperling <gbsperling@gmail.com> wrote:

I want to come back to my comment that was somewhat between Neera and Gary.

I agree with Gary that we should not flip flop on Glass Steagall because one, it is make-believe to think it caused the crisis in any way; 2) because it is make believe, it is crazy for her to buy into the idea that it was her husband as opposed to a Republican Administration bore the regulatory responsibility for the worst financial crisis in our life time.

But where we could think more, is how without buying into the Glass-Steagall as cause and cure line -- we could find ways to blur a little more going forward, that could use the two words.

Such as: "I do want to strengthen some of the key protections against risky behavior that Glass Steagall was designed to prevent -- which is why I want to strengthen Volker Rule etc. And I want to make sure we never see the type of let Wall Street do whatever they want like took place under George Bush.....[and then hit a litany]

That structure has us not focusing on being against Glass Steagall, but quickly buys into some of the values going forward and then pivots to an all out hit on Bush and reckless practices under Bush watch that led to crisis......"

Thoughts?

On Fri, Sep 11, 2015 at 1:42 PM, Gary Gensler <ggensler@hillaryclinton.com> wrote:

I understand  what Neera is saying that Glass Steagall is not well understood by the public, but I would still have HRC keep to that her focus is on risk.  That's why we have the risk fee, strengthening Volcker and Shadow Banking and if desired add that she would not hesitate to hold banks accountable and not hesitate if need be to downsize or even break some of them up.  On Glass Steagall, it's far more than just not conceding it.  I think that particularly given what HRC has said and that Lehman, AIG and so many others would have failed even with Glass Steagall that HRC is on safer grounds talking about risk and even size than what lines of business banks are in.  It appears a bit flip floppy whereas the risk and size are far less so.  

On Fri, Sep 11, 2015 at 3:47 PM, Neera Tanden <ntanden@gmail.com> wrote:

Where I'm disagreeing with this group is precisely on the words Glass Steagall.  No one knows what it is, but being on the wrong side of it is dangerous.  So I'm not committing her to reinstate it, but I also think shutting it down is ill advised; I fear that in the black and white world we're living in, that is shorthanded as pro-bank.  So that is why I would remain open to it as a policy option in the future. 

 

 

On Fri, Sep 11, 2015 at 2:58 PM, Gene Sperling <gbsperling@gmail.com> wrote:

Very much agree

Sent from my iPhone

On 11 Sep 2015, at 11:53, Gary Gensler <ggensler@hillaryclinton.com> wrote:

If we need words I would go with " I will work to reduce the size of the banks in a heartbeat"  or if more is needed to go with "I will work to reduce the size or even breakup the banks in a heartbeat ..." rather than a reference to reinstating Glass Steagall.  

I say this as we've already said that crisis wasn't about Glass Steagall restrictions but about risk.  Also I believe that as a policy matter that the issue about too big or too risky to fail is about size and risk not Glass Steagall.  I would prefer not to concede that point.

Further, Dodd Frank gave the FDIC and Fed to restructure or even downsize banks if the living will process leads to a conclusion that the risk of resolution is too great.

On Fri, Sep 11, 2015 at 2:37 PM, Jake Sullivan <jsullivan@hillaryclinton.com> wrote:

That’s close to what we have minus the words Glass Steagall.  Are those magic words for you?

 

From: Neera Tanden [mailto:ntanden@gmail.com]
Sent: Friday, September 11, 2015 2:17 PM
To: Jake Sullivan <jsullivan@hillaryclinton.com>; John Podesta <john.podesta@gmail.com>; Gene Sperling <gbsperling@gmail.com>; Gary Gensler <ggensler@hillaryclinton.com>; Mike Schmidt <mschmidt@hillaryclinton.com>; Michael Shapiro <mshapiro@hillaryclinton.com>; David Kamin <davidckamin@gmail.com>
Subject: Glass steagall

 

i think most people know I worry that this is the closest thing to an Iraq vote we have to face us. And a big potential problem in the debate. 

 

Why can't she say the following:

Too big to fail  are problems. Should never happen again etc. I will take steps - higher cap requirements, whatever you have on list -to ensure we protect Americans.  I think those will work better.  

 

I will work every day to make sure we protect Americans so they never suffer for the excesses on  Wall Street.  But if banks are growing too big to manage and we need to take these steps  tetc etc, believe me I will work to reinstate glass steagall in a heartbeat bc this Americans losing so much for the banks can never happen again. 

 

She's not conceding it was responsible for the financial crisis.  But her openness will be better than a hard and fast position that puts her on the bank side of the ledger. 

 

Anyway I just offer it as a thought. 

Thought: 

Why don't we do our own break up too big and risky to fail proposal? 

We lean more to left on giving regulators more explicit power to break up banks or force them to divest when justified. 

The conditions are a combo or size, risk and lack of accountability. We no longer are in a "no" world but a "we have a better proposal world." When he question is are you for reinstating G-S or break up bank bill, we say we have a better proposal: one designed to deal with realities today. We acknowledge when pressed that simple one size fits all rules don't work need to always look at size, risk and accountability. So we target where real dangers are.

When asked why not put back Glass Steagall -- we say because it is not good enough. It would not have prevented Countrywide, Bear Stearns, Lehman brothers. But she explains that HRC bill would!

They beauty of this is we stay true to the truth: but we make the case not by explaining why we are against Glass Steagall but why we need something stronger and more likely to prevent another crisis in 2030 and not 1930. It is all the same arguments but it is all on offense as opposed to defense.

What do you think?

Sent from my iPhone

On 12 Sep 2015, at 10:40, Neera Tanden <ntanden@gmail.com> wrote:

First I would expect Biden to endorse glass steagall if he gets in. What do we think he and warren were discussing for the hour? But we will know something Ike that hopefully before the debate. But it would be my bet that he ends up in favor.

To answer Gary's email, we have an essential conundrum. Glass Steagall has become shorthand for tough on the banks with the left. Again, I'm not saying it's fair or unfair. It just seems very hard to undo in the time we have. So we can say all these things you'd like her to say but when she says she's against reinstating on that debate stage I am worried that will be shorthanded as she's pro-bank.

We all have different discussions about policy with different people and different assessments. But a lot of people see an ftt as a criticism of Wall Street simply by being a tax on stocks. Though I'm all for making brokers pay it. It's not like people are super distinguishing the banks, hedge funds and Wall Street.

But hey, if she had been for reinstating glass steagall, that would create a different calculus for an ftt. Given we are not for reinstating, I think that makes an ftt even more of an imperative. And at least it gives her something to say about taking a tough stand in this realm.

Now I think I've at least properly beaten this dead horse for my part.

On Sat, Sep 12, 2015 at 12:34 PM Michael Shapiro <mshapiro@hillaryclinton.com> wrote:

This is not my area at all. So people should weight Schmidt and Pyles and Gary's views much, much more strongly. 

But my understanding is that Biden is somewhat weaker with liberals on financial reform issues. If we are worried about him entering, and drawing liberals either from us or Sanders because he's in theory more electable, I'd lean toward going stronger on financial accountability to the extent we can in a way that does not seem like a lurch but an evolution of the principles we've put out and the lessons of the crisis. 

Sent from my iPhone

On Sep 12, 2015, at 12:26 PM, Gary Gensler <ggensler@hillaryclinton.com> wrote:

+ Pyle

On Sat, Sep 12, 2015 at 12:20 PM, Gary Gensler <ggensler@hillaryclinton.com> wrote:

I think that what HRC is confronting on the rope lines when folks ask about Glass Steagall is less about the specifics of that actual law and far more that a broad part of the public think that we have a) not yet solved for the risks that Banks pose to their daily lives & b) that the banks and their executives are entitled or not held accountable as they should be.  It's a mixture of not solving both a) Too Big to Fail and b) Too Big  to Jail.  

And I have heard too often from progressive advocates some mixture of concern our positions given some mixture of a) Hillary having been a NY Senator thus close to Wall Street, b) the perceived deregulation of WJC years & c) many of Hillary donor/adviser base coming from Finance.  

For me, if we wish to address these more head on, we should consider dialing up the substance of both our risk agenda and our accountability agenda.

On risk, our current liability risk fee does tip the scales directly regarding size and risk, but it does not set any absolute limit to size, risk or complexity.  It's also pretty technical rather than a clear rule.  Dialing up, I think that we could say that Hillary is calling for strengthening the Dodd Frank provision which already allows for regulators (the FDIC and Fed) to downsize or restructure banks.  The authority is already there but by calling  for a broadening of that authority we can associate ourselves more directly wish a call to downsize banks.  We could say that the law needs to make it explicit that the regulators can downsize for risk to the economy, complexity to manage or overall size relative to the markets.  Or if we wished to dial this  knob further, we could suggest a specific number saying that given  that it is almost certain that some large systemic bank will fail we should limit their scale.

I don't, however, think that we should stress Glass Steagall or lines of business other than our call for closing some loopholes in Volcker.

For the public it's would be clear and somewhat like rules that over-sized vehicles are banned from the highways in part to protect the rest of the public from when they crash.  We could say why not protect the public from inevitable future crashes of Too big to Fail Banks.

On accountability, we could dial up the current provisions of senior executives' bonuses being on the line when large fines are paid by tweaking some of the language (making it clearer and with less defenses) and upping the rhetoric.  We could also add that regulators have clear authority to force senior executives to lose their job for misdeeds that happened under their supervision even if they didn't participate in the misdeed.

Lastly, though the FTT has been well litigated, I wanted to comment that one of the reasons I don't think  that it will get us much credit is that it does not go to either of the public's deeply held concerns.  An FTT effects markets by putting a tax on every trade.  It does not address Bank risk, Too Big to Fail, accountability or Too Big to Jail.  My view is that the debate will still focus on these items and that Hillary would still get the rope line questions. 

Gary

On Sat, Sep 12, 2015 at 10:09 AM, Neera Tanden <ntanden@gmail.com> wrote:

Yes. And the broad test is too complex to manage. But I'm obviously happy to work with others on other triggers if you don't like that one.

On Sat, Sep 12, 2015 at 9:58 AM Jake Sullivan <jsullivan@hillaryclinton.com> wrote:

I'm trying to get same answer.  What I'm trying to figure out is if you are saying, I need a glass steagall tool I can use if a bank can't meet my tests?

On Sep 12, 2015, at 9:53 AM, Neera Tanden <ntanden@gmail.com> wrote:

I would say that if there's a bank that needs to be broken up she needs a glass steagall tool to break them up. She can't really do that now.

However, I'm open to saying a pattern of too much complexity. So it's finding several banks. But I'm trying to find a debate answer not a policy rollout. Happy to think longer for that kind of answer.

Obviously she can't break up any bank on her own. The higher cap requirements are designed to assure much less likelihood of failure. We have pushed for higher ones. But we live in a quandary which is no one knows what any of this means and glass steagall has the most resonance with reporters and the like.

I get Jamie Damon's argument that having both sides of the business helped him weather the storm. They took profits and losses at different times. But I think there are some reasonable people on Wall Street who think the complexity is a problem.

On Sat, Sep 12, 2015 at 9:38 AM Jake Sullivan <jsullivan@hillaryclinton.com> wrote:

So if there is one of those we reinstate glass steagall for all banks?

Just trying to understand. 

On Sep 12, 2015, at 9:36 AM, Neera Tanden <ntanden@gmail.com> wrote:

A bank too complex to manage that therefore is too risky.

On Sat, Sep 12, 2015 at 9:33 AM Jake Sullivan <jsullivan@hillaryclinton.com> wrote:

To summarize, your position would be that she would be open to reinstating glass steagall if it came to that?   What's the answer to "what's it gonna take"?

On Sep 12, 2015, at 9:09 AM, Neera Tanden <ntanden@gmail.com> wrote:

Look, I wasn't there in the 90s. But I don't think she will win a battle on glass steagall's role in the crisis. And I think it is problem. Fair or unfair it's pretty ingrained. So I'm trying to think of a third way between support and opposition. I think O'Malley will push her to be opposed and it could be really deadly.

But I'm happy to register my dissent from your views and move on.

On Fri, Sep 11, 2015 at 9:54 PM Gary Gensler <ggensler@hillaryclinton.com> wrote:

I would say no and say that this 1930's policy solution doesn't work in this century.  And it wouldn't have done anything about AIG, Lehman or many other too big to fail failures.  

Sent from my iPhone

On Sep 11, 2015, at 9:42 PM, Neera Tanden <ntanden@gmail.com> wrote:

someone follows up with
"Are you for reinstating glass steagall or not?"

Gene's artful version still gets us to no.

I am saying she says some version of I will fix the problem w out it. But if it makes sense to do bc of issues that arise - e g too much complexity to manage - then she will do it. She's not saying she will do it now. She's not saying it was responsible for the crisis. But she will reinstate if future need arises.

I guess I worry about everyone else up on the stage saying reinstate glass steagall and not giving her more.

I recognize I'm in a different place than others. You may not want to go this far, but given her anxiety on Glass Steagall I did want to offer up an alternative.

On Fri, Sep 11, 2015 at 6:00 PM Gary Gensler <ggensler@hillaryclinton.com> wrote:

I think Gene is onto a possible path forward - buying into the values of Glass Steagall - while not the actual specifics for our times.  Glass Steagall was another generations solution for a similar problem - risk - but a problem that has taken on new forms nearly 80 years later.  Obama focused and succeeded on much with Dodd Frank, but can and need to do more.  That's why I am for Risk fee, strengthening Volcker, etc. and if needed would in a heartbeat ....

On Fri, Sep 11, 2015 at 5:02 PM, Gene Sperling <gbsperling@gmail.com> wrote:

I want to come back to my comment that was somewhat between Neera and Gary.

I agree with Gary that we should not flip flop on Glass Steagall because one, it is make-believe to think it caused the crisis in any way; 2) because it is make believe, it is crazy for her to buy into the idea that it was her husband as opposed to a Republican Administration bore the regulatory responsibility for the worst financial crisis in our life time.

But where we could think more, is how without buying into the Glass-Steagall as cause and cure line -- we could find ways to blur a little more going forward, that could use the two words.

Such as: "I do want to strengthen some of the key protections against risky behavior that Glass Steagall was designed to prevent -- which is why I want to strengthen Volker Rule etc. And I want to make sure we never see the type of let Wall Street do whatever they want like took place under George Bush.....[and then hit a litany]

That structure has us not focusing on being against Glass Steagall, but quickly buys into some of the values going forward and then pivots to an all out hit on Bush and reckless practices under Bush watch that led to crisis......"

Thoughts?

On Fri, Sep 11, 2015 at 1:42 PM, Gary Gensler <ggensler@hillaryclinton.com> wrote:

I understand  what Neera is saying that Glass Steagall is not well understood by the public, but I would still have HRC keep to that her focus is on risk.  That's why we have the risk fee, strengthening Volcker and Shadow Banking and if desired add that she would not hesitate to hold banks accountable and not hesitate if need be to downsize or even break some of them up.  On Glass Steagall, it's far more than just not conceding it.  I think that particularly given what HRC has said and that Lehman, AIG and so many others would have failed even with Glass Steagall that HRC is on safer grounds talking about risk and even size than what lines of business banks are in.  It appears a bit flip floppy whereas the risk and size are far less so.  

On Fri, Sep 11, 2015 at 3:47 PM, Neera Tanden <ntanden@gmail.com> wrote:

Where I'm disagreeing with this group is precisely on the words Glass Steagall.  No one knows what it is, but being on the wrong side of it is dangerous.  So I'm not committing her to reinstate it, but I also think shutting it down is ill advised; I fear that in the black and white world we're living in, that is shorthanded as pro-bank.  So that is why I would remain open to it as a policy option in the future. 

 

 

On Fri, Sep 11, 2015 at 2:58 PM, Gene Sperling <gbsperling@gmail.com> wrote:

Very much agree

Sent from my iPhone

On 11 Sep 2015, at 11:53, Gary Gensler <ggensler@hillaryclinton.com> wrote:

If we need words I would go with " I will work to reduce the size of the banks in a heartbeat"  or if more is needed to go with "I will work to reduce the size or even breakup the banks in a heartbeat ..." rather than a reference to reinstating Glass Steagall.  

I say this as we've already said that crisis wasn't about Glass Steagall restrictions but about risk.  Also I believe that as a policy matter that the issue about too big or too risky to fail is about size and risk not Glass Steagall.  I would prefer not to concede that point.

Further, Dodd Frank gave the FDIC and Fed to restructure or even downsize banks if the living will process leads to a conclusion that the risk of resolution is too great.

On Fri, Sep 11, 2015 at 2:37 PM, Jake Sullivan <jsullivan@hillaryclinton.com> wrote:

That’s close to what we have minus the words Glass Steagall.  Are those magic words for you?

 

From: Neera Tanden [mailto:ntanden@gmail.com]
Sent: Friday, September 11, 2015 2:17 PM
To: Jake Sullivan <jsullivan@hillaryclinton.com>; John Podesta <john.podesta@gmail.com>; Gene Sperling <gbsperling@gmail.com>; Gary Gensler <ggensler@hillaryclinton.com>; Mike Schmidt <mschmidt@hillaryclinton.com>; Michael Shapiro <mshapiro@hillaryclinton.com>; David Kamin <davidckamin@gmail.com>
Subject: Glass steagall

 

i think most people know I worry that this is the closest thing to an Iraq vote we have to face us. And a big potential problem in the debate. 

 

Why can't she say the following:

Too big to fail  are problems. Should never happen again etc. I will take steps - higher cap requirements, whatever you have on list -to ensure we protect Americans.  I think those will work better.  

 

I will work every day to make sure we protect Americans so they never suffer for the excesses on  Wall Street.  But if banks are growing too big to manage and we need to take these steps  tetc etc, believe me I will work to reinstate glass steagall in a heartbeat bc this Americans losing so much for the banks can never happen again. 

 

She's not conceding it was responsible for the financial crisis.  But her openness will be better than a hard and fast position that puts her on the bank side of the ledger. 

 

Anyway I just offer it as a thought.