Hillary Clinton Says Prosecuting Individuals is Key to Wall Street Reform

NEW YORK (TheStreet) -- Democratic presidential candidate Hillary Clinton, whose rivals have won points with voters by backing tighter regulations on Wall Street, is proposing to reform the finance industry by punishing individual investors, financial managers and traders for misconduct.

Lawbreakers will be "prosecuted and imprisoned" and bankers would face the possibility of tougher criminal penalties, according to a summary of Clinton's plan obtained by the Associated Press on Wednesday. They also would be banned from future employment in the finance industry and could find their compensation penalized in a government settlement.

The proposals came just days before the first Democratic presidential debate, to be held at the Wynn Las Vegas at 9 p.m. ET on Oct. 13. Liberal Democrats have spent months calling on Clinton to take a more aggressive approach to regulating Wall Street and one of her opponents, Vermont Sen. Bernie Sanders, has gained ground with a populist economic message that vows to take on the "billionaires."

Clinton's close ties to Wall Street and the centrist economic policies of the administration of her husband, former President Bill Clinton, make some in her party skeptical of her populist credentials. Both Clintons have earned millions in speaking fees, including some from Wall Street banks, and daughter Chelsea and her husband have worked at hedge funds.

In the first major economic speech of her presidential campaign, in July in New York City, Clinton expressed outrage at accounts of money laundering and currency manipulation involving several major financial firms. She said few rogue traders had faced consequences, individually, for malfeasance, a subtle swipe at the Obama administration.

"This is wrong, and on my watch it will change," she said. Regulation of Wall Street gained heightened importance following the financial crisis of 2008, when high-risk lending fueled a housing bubble that eventually led to the collapse of investment bank Lehman Brothers. Borrowers with poor credit had found themselves unable to repay high-interest loans, and securities based on those mortgages -- which were held by many Wall Street institutions -- plummeted in value.

The government spent billions propping up banks, as well as insurance giant AIG, while home foreclosures skyrocketed. Congress under Obama attempted to rein in some of the riskiest practices with Dodd-Frank law, which Clinton's campaign has backed.

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