Wall Street banks and their top executives should face new tax penalties to keep them from engaging in risky practices that can pose threats to the financial system, U.S. Senator Elizabeth Warren said Wednesday.
Warren, who has been a leading defender of the Dodd-Frank Act, called on the Republican-led Congress to relent from attacks on the 2010 law and close a tax loophole that she said encourages bank chief executive officers to seek quick gains.
“We can close that loophole and stop pushing companies to reward short-term thinking,” the Massachusetts Democrat said at a financial regulation conference in Washington. “Congress should change the tax code so that executive compensation is aligned with the long-term health of these companies.”
Warren used her speech to lay out a broad agenda for further bolstering Wall Street oversight, calling for a cap on the size of the biggest banks and financial penalties for those posing the greatest risk to the financial system.
“We know what changes we need to make financial markets work better,” Warren said in remarks prepared for the Hyman P. Minsky Conference on the State of the U.S. and World Economies. “Strengthen the rules to prevent cheating. Make the cops do their jobs. Cut the banks down to size. Change the tax code to promote more long-term investment.”
Banks that aren’t well-capitalized should pay more so that taxpayers aren’t on the hook for the negative consequences of their risk-taking, Warren said. She also called for creating a transactions tax to curtail high-frequency trading.
‘Massive Bonuses’
Tax-code changes should be implemented to take away banks’ incentive to lean on “massive bonuses” to pay executives, which Warren said rewards short-term thinking. She faulted the Securities and Exchange Commission, which was authorized by Dodd-Frank to address executives, saying the agency “still can’t seem to figure out how to write those rules.”
Warren Says Banks Should Face Bigger Tax Burden to Balance Risks
April 15, 2015
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