If Wall Street Reform Becomes 2016 'Litmus Test,' Clinton Will Have Lots of Explaining To Do
Hillary Clinton's opposition to reinstating banking firewall makes it clear where she stands in the fight against the industry's powerful influence
As Thursday marked the 16th anniversary of the repeal of the Glass-Steagall Act, which erected a firewall between investment and commercial banking, some are assessing if new measures to break up large banks will become a litmus test in the 2016 presidential race.
Because Glass-Steagall is seen as a challenge to Wall Street, many experts say Hillary Clinton's opposition to reinstating that provision makes it clear where she stands in the fight against the industry's powerful influence.
The call to reinstate Glass-Steagall has picked up steam from influential progressives like Sen. Elizabeth Warren (D-Mass.), who in July introduced a bill that would restore the banking barrier, as well as presidential hopefuls Sen. Bernie Sanders (I-Vt.) and former Maryland Governor Martin O'Malley.
"A lot of people view [Glass-Steagall] as a litmus test," Dennis Kelleher, who heads the financial reform advocacy group Better Markets, told The Hill on Thursday. A candidate who supports reinstating the law, Kelleher explained, is saying, "'I get it, I get it. I will be tough on Wall Street. Trust me.'"
But Clinton is opposed to the idea, putting her at odds on the issue with not only Warren and Sanders, but also Republicans like John McCain and Mike Huckabee.
As the only Democrat who has opposed reinstating a law similar to Glass-Steagall—and has been criticized for her longstanding ties to big banks—Clinton holds a singular position in the presidential race. Her plan to take on Wall Street's unchecked power, unveiled last month, promises to crack down on financial crimes and risky trading—but, as financial reform advocates cautioned, was "far less bold" than Warren's and Sanders' agendas. As CNN Money summed up at the time, "The reaction [to Clinton's plan] from the banking community was a shrug, if not relief."
TruthDig's Robert Scheer noted last month that Clinton has benefited from her husband's repeal of Glass-Steagal even as she built her own record regarding Wall Street.
When it comes to the economic policies driving the 2016 election, wrote Scheer, "Hillary Clinton seems to be even less conflicted than her husband in serving the super rich at the expense of the middle class."
In a piece for the Huffington Post published Wednesday, Kelleher wrote, "If Glass-Steagall hadn't been repealed, there's little doubt it would have lessened the depth and breadth of the 2008 financial crisis, which has cost our country trillions of dollars and caused tens of millions of people to lose their jobs, homes, savings and much more."
He pointed to the case of Citigroup, which has "failed repeatedly over the past 100 plus years and has required frequent taxpayer and government bailouts."
In 2008, it was the single largest recipient of federal bailouts, the only Wall Street bank not to repay its $25 billion TARP "loan," a bank that would have been subject to Glass-Steagall and was supposed to be supervised by the New York Fed (headed by Tim Geithner at the time). (It also happens to be where two of Clinton's Treasury Secretaries, Bob Rubin and Larry Summers, worked after leaving the Clinton administration.)
During the Democratic presidential debate in October, both Sanders and O'Malley criticized Clinton over her relatively weak stance on Wall Street. Clinton countered that her plan was more comprehensive than the 21st Century Glass-Steagall Act.
She has also defended other banking regulation bills such as the Dodd-Frank Wall Street Reform and Consumer Protection Act. But as Common Dreams reported in July, many key components of the bill—five years after its passage—have yet to be implemented.