Sen. Elizabeth Warren and other Democrats in Congress are rolling out a batch of tough legislative proposals designed to rein in and even jail corporate executives, a push that they say would protect investors and consumers but one that also serves as a preview of their looming 2020 campaign.
On Wednesday morning, Warren, a Massachusetts Democrat and presidential candidate, released a proposal that would incarcerate executives for wrongdoing at companies under their watch — legislation she framed as a response to widespread harm unleashed by Wells Fargo and Equifax on millions of Americans.
In the afternoon, House Financial Services Committee Democrats kicked off work on six bills that would restrict stock trading by executives, cement a ban on insider trading and strengthen legal protections for corporate whistleblowers.
“Capitalism will not succeed if it’s regarded as rigged,” Rep. Brad Sherman (D-Calif.) said at the House hearing. “The bills before us today will make our system fairer.”
While the bills have little chance of becoming law, they offer a potent weapon for Democrats to wield as they try to regain power in Washington, including the White House. The legislative drive is already putting Republicans in an awkward position as they try to push back and warn that the proposals, opposed by powerful business groups, could do more harm than good to markets and investors.
“This campaign bill is designed to appeal to the worst Robin Hood instincts in voters,” J.W. Verret, a George Mason University law professor and former House Republican aide, said of Warren’s legislation.
GOP lawmakers will face similar tension next week when Democrats grill CEOs of the largest banks at a high-profile House Financial Services Committee hearing.
Warren is using her bill to address lingering frustration from the 2008 financial crisis over the lack of executives penalized for the Wall Street meltdown. A massive customer account scandal at Wells Fargo in 2016 and an historic consumer data breach at Equifax in 2017 kept the fire burning, providing plenty of fodder for her “Corporate Executive Accountability Act.”
Warren’s bill would expose executives of large corporations to jail time if their companies are found guilty of crimes or agree to regulatory settlements for offenses that affect 1 percent of the population of the U.S. or a given state.
The bill, which could resonate with voters seeking greater corporate accountability, is just one piece of an extensive policy portfolio that Warren has built before next year’s Democratic Party primaries.
“Personal accountability is the only way to ensure that executives at corporations will think twice before ignoring the law,” Warren wrote in the Washington Post on Tuesday. “It’s time to stop making excuses and start making real change.
In the House, Democrats this week offered a range of measures aimed at publicly traded companies and the stock market under the theme of executive accountability.
The proposals include a bill by Rep. Carolyn Maloney (D-N.Y.) intended to prohibit public company executives from trading their firm’s stock in the period of time between when they learn of potentially market-moving information and its public disclosure.
Another bill by Rep. Jim Himes (D-Conn.) would codify a ban on insider trading in the law. Himes, a moderate Democrat and former Goldman Sachs vice president, said he was attempting to resolve what he called a “judicial mess” of court decisions that have complicated the prosecution of insider trading cases, which rely on fraud provisions in securities law.
Himes implored Republicans at Wednesday’s hearing to join his cause, which he described as a pursuit of legal clarity rather than greater regulation.
“If we’re going to send people to jail for breaking the law, we should make that law very clear,” he said.
But Republicans and a witness from the U.S. Chamber of Commerce criticized the committee’s bills on Wednesday, an initial response that suggested the legislation may amount to no more than messaging in a divided Washington until at least after the election. Despite saying they were sympathetic to the cause of fighting insider trading and protecting investors, they warned that the bills would create more barriers to companies raising capital and in turn limit opportunities for individual investors.
“They assume that there’s this vacuum, that there’s nothing that holds anybody accountable to any level and only their bill now comes in and says, `Well, now we’re going to make sure insider trading is illegal’,” Rep. Bill Huizenga (R-Mich.) said after Wednesday’s House hearing. “Go ask Martha Stewart about that.”