Could a Treasury Secretary Carl Icahn Fix Wall Street?

The words "Treasury Secretary Carl Icahn" might send shivers up many spines. But the controversial corporate raider-turned-shareholder-activist appears to top Donald Trump's list for the nation's most powerful economic post if he captures the presidency in November. Here's the surprise, though: Trump's fellow billionaire--by some measures the wealthiest man on Wall Street--could wind up pushing policies that bring a smile to the financial system's harshest critics.

One reason begins with this: Wall Street will be a target in 2017 no matter whether Hillary Clinton or Trump wins the White House. Each candidate has taken aim at titans of the financial world, called out crony capitalism, decried greedy hedge funds. Public anger at the financial system is just that intense and widespread.

But the public's hostility is free-floating. Are voters angry about CEO pay? Corporate political influence in the wake of Citizens United? Short-termism? Greed? Income inequality? Fraud? A rigged system? Too big to fail? It's a porridge of all of the above. Across the board, the consensus holds, Wall Street has conspired to gain for itself at the expense of the many. But with no agreement on the scope of the problem, those contesting for political power clash over what to do about it. That's where Icahn comes in.

Few even in the Occupy movement have sounded populist drums louder than Icahn. "A lot of people die fighting tyranny," he once proclaimed in a bare-knuckled assault on management at oil giant Texaco. "The least I can do is vote against it." Firing from multiple social media platforms, he has long attacked the financially entrenched with rhetoric as hot as any from Bernie Sanders. Trump may have lots of other wholly unappetizing ideas, but one bedrock stance Icahn has held is that law and regulation should be shaped to unleash shareholder activism on complacent or failing corporate boards. You can see that in the just-launched CIRCA, a lobby backed by Icahn and other activist investors.

Across the aisle, Hillary Clinton rails against "hit-and-run activists." But her prescriptions for the capital market may not be as far from Icahn's as they might seem. Clinton has called for a "new generation of committed, long-term investors" willing to wield their shareholder clout to combat "quarterly capitalism." Sure, she might back measures to curb investor myopia. But to stimulate the brand of long-term activism she wants would require reforms on which the two leading presidential candidates might converge. Neither has yet offered to spell out details of their economic proposals. But pragmatic, shovel-ready solutions are waiting.

Remember, first, that Wall Street runs largely on capital provided by some 92 million Americans--or more than one in three adults--who entrust nest eggs to fund companies. Yet financial middlemen too often treat citizens' retirement savings as a kind of stealth ATM, siphoning value from savers. Studies show that investment firms can apply often-hidden fees that can claim as much as 38 percent of lifetime savings at a typical rate. And in a damaging financial jujitsu, some of the same fund companies may invest citizens' money in companies that overpay CEOs, cut jobs, and slash research in innovation for fleeting pops in stock price. They may even vote shares to keep failing boards in place.

Muscular steps to safeguard hard-earned capital from Wall Street predators could be voter catnip for either Trump or Clinton. Such steps could also boost the economy. Studies show benefits when money is allocated efficiently, with fewer intermediaries taking tolls at every stage, and when savings investments are overseen by skilled, independent fiduciaries. Corporate boards would have more freedom to innovate if more institutional investors who own their stock acted as conscious stewards instead of chronic traders. Blackrock, State Street Global Advisors, TIAA and Vanguard are among fund companies making good progress in embracing long-term value in their approach to stock ownership. It can be done.

Reform proposals exist that synch with both Icahn's and Clinton's desire to empower institutional investors as an antidote to Wall Street failures. They would align such funds with grassroots savers. For instance, investing institutions could be required to disclose the equivalent of a nutrition statement, so that consumers could learn in plain language whether their financial agents are configured to act in their best interests. Funds could be obligated to make it easy for anyone checking their accounts to spot exactly how much they pay in fees. And legislation could require retirement savings plans finally to have independent oversight boards that police fees, curb conflicts of interest, pick funds with responsible voting and engagement policies at portfolio companies, and demand money manager compensation that better matches savers' long-term interests.

If leaders were to advocate those pragmatic steps in the campaign, they could offer hope of converting formless hostility into real advances in clawing back accountability from Wall Street. Given what they've said so far, a Treasury Secretary Carl Icahn under a President Trump might approve. So might a President Hillary Clinton.