Capitalizing on populist anger toward Wall Street, a coalition of more than 20 labor unions and activist groups on Tuesday launched a new campaign to reform the financial industry.
The group, Take On Wall Street, plans to combine the efforts of some of the Democratic Party’s biggest traditional backers, from the American Federation of Teachers and the AFL-CIO to the Communications Workers of America. The group says it will aim to turn the public’s lingering anger at the financial sector into policy initiatives that could change the way that Wall Street works.
Among its biggest targets will be doing away with a law that allows private equity managers to pay lower taxes through something known as the “carried interest loophole.” These managers receive a share of profits for any gains they create for their clients, and this income is treated as long-term capital gains and taxed at a lower rate.
“We know that because of this loophole that there are many hedge fund and Wall Street millionaires that pay a lower tax rate than truck drivers, nurses, [and] teachers,” said Sen. Tammy Baldwin (D-Wis.), who has introduced several pieces of legislation targeting Wall Street in recent years and is a supporter of the new coalition.
The group is pouncing during a period in which Wall Street has found itself the target of both Republican and Democratic presidential candidates. Democratic candidate Bernie Sanders has called for breaking up the big banks and criticized rival Hillary Clinton for accepting money from Goldman Sachs to deliver speeches, while Republican presumptive nominee Donald Trump has been critical of carried interest.
“I think the tone of the election has reminded many people just how deeply felt the frustration and anger is about the way that Wall Street has shaped the economy in its own interest,” said Lisa Donner, executive director of Americans for Financial Reform, a coalition of more than 200 civil rights, consumer, labor, business, investor, faith-based, and civic and community groups.
Unlike previous anti-Wall Street campaigns such as Occupy Wall Street, the new group hopes to organize a campaign that will span state houses and as well as the halls of Congress, potentially forecasting a big fight on financial reform in 2017.
“We are going to make this an issue in congressional races. No one will be able to run from this,” said Richard L. Trumka, president of the labor union AFL-CIO. People are saying “that they are fed up with Wall Street writing the rules.”
In addition to the issue of carried interest, the group expects to galvanize support for breaking up the big banks and reviving a version of the Glass-Steagall Act, which prevented the combination of commercial and investment banks. It is also expected to push for a transaction tax, which would force some Wall Street traders, particularly high-frequency traders, to pay a fee every time they buy or sell a stock or bond.
The proposed so-called transaction tax has already raised concerns among some on Wall Street. Such a tax would also effect pension funds or other large investors who sometimes trade thousands of stocks a day, they say.
“While some politicians claim this tax is directed at high frequency trading, the truth is that it would directly hit the pension funds of hard-working teachers, nurses and teamsters,” said Bill Harts, chief executive of Modern Markets Initiative, which represents high frequency trading firms.
“We don’t understand why unions would support something that would so clearly hurt their membership’s pension funds.”
This comes at a time when the financial industry is also bulking up. Five of the country’s most well-known activist investors, including Carl Icahn and Paul Singer, have banded together to form a new lobbying group, the Council for Investor Rights and Corporate Accountability. The group says it will promote the good that shareholder activists can accomplish by becoming a thorn in the side of complacent CEOs.
Activist investors usually take a small stake in a publicly-traded company and then agitate for change they believe will raise the company’s profits or stock price. But activists have become concerned that the industry is gaining a bad reputation on Capitol Hill and could be targeted by lawmakers soon.
“Successful shareholder engagement depends on advocates’ ability to make a case for change when companies are underperforming,” Rob Collins, senior adviser for the group, said in a statement announcing the launch of the group last week.
Take On Wall Street’s future success may hinge on Democrats gaining control of the Senate, bolstering the influence of supporters such as Sen. Elizabeth Warren (D-Mass.), a vocal Wall Street critic.
“This will not be an easy fight. Wall Street has money—they have money and access to a lot of senators and congressmen,” Warren told reporters at the launch event Tuesday. “We are in this fight because someone has to be willing to fight back — and that’s us.”