Hillary Clinton on Thursday put forth her plan for Wall Street reform, absent from which is an element progressives see as key: the reinstatement of Glass-Steagall.
The Depression-era law, which put a wall of separation between investment and commercial banking, was repealed under President Bill Clinton in 1999. The most important effect of its repeal, wrote Public Citizen president Robert Weissman, "was to change the culture of commercial banking to emulate Wall Street's high-risk speculative betting approach."
Clinton's newly unveiled plan puts her approach to Wall Street reform squarely at odds with her rivals for the Democratic presidential nomination, Sen. Bernie Sanders (I-Vt.) and former Gov. Martin O’Malley (D-Md.). Sanders, for his part, has given his support to the 21st Century Glass-Steagall Act, which aims to "reduce risk in the financial system and dial back the likelihood of future financial crises."
Explaining her plan in a Bloomberg op-ed, Clinton writes that she would "increas[e] resources for the Department of Justice and the Securities and Exchange Commission to investigate and prosecute executives for financial crimes;" "strengthen and enforce the Volcker Rule so banks can’t make risky and speculative trading bets with taxpayer-backed money;" "give regulators the authority they need to reorganize, downsize or even break apart any financial institution that is too large and risky to be managed effectively;" and put a tax on some high-frequency tax trades.
CNN Money reports, "The reaction [to Clinton's plan] from the banking community was a shrug, if not relief."
That may not be a surprise. As the International Business Times points out, the Clintons have deep ties to Wall Street:
For years, Clinton has had a reputation for being cozy with the finance industry. She did call for Wall Street reforms early during her primary run in 2008, saying—accurately, as it turns out—that subprime mortgages were a problem that many were ignoring, but the Clinton and her husband have also amassed millions of dollars in personal wealth since leaving the White House in 2001. A big portion of that cash came from private, paid speeches and big Wall Street banks were among the institutions that wrote those checks, including a $200,000 speech given to Goldman Sachs by Bill Clinton while the bank was lobbying his wife’s State Department.
During her 2008 presidential run, her third biggest donor base was the security and investment industry – coming in behind lawyers and the indiscriminate grouping of retired people – with $7.3 million in donations, according to the Center for Responsive Politics (CRP). So far in the 2016 race, the industry has been the fourth biggest, giving $1.36 million to her campaign. That’s one quarter’s worth of fundraising, CRP data shows.
Responding to Clinton's plan, economist Dean Baker of the Center for Economic and Policy Research told TIME, "In a lot of ways it was stronger than what I expected from her given her close Wall Street ties," though he added, "I would like to go back to Glass-Steagall to have the strict separation" between commercial and investment banking. Neil Sroka, spokesman for Democracy for America, told the publication that "her continued rejection of a new Glass-Steagall is troubling."
Robert Borosage, co-director of the liberal Campaign For America's Future, told The Hill that Clinton's plan is "headed in the right direction," but is still "a long way from breaking up the big banks" and "far less bold than the agenda of Sanders ... or Elizabeth Warren.”
As Nomi Prins, a former investment banker and the author of Other People's Money: The Corporate Mugging of America, wrote in July:
No matter what spin is used for campaigning purposes, the idea that a critical distance can be maintained between the White House and Wall Street is naïve given the multiple channels of money and favors that flow between the two. It is even more improbable, given the history of connections that Hillary Clinton has established through her associations with key bank leaders in the early 1990s, during her time as a senator from New York, and given their contributions to the Clinton foundation while she was secretary of state. At some level, the situation couldn’t be less complicated: her path aligns with that of the country’s most powerful bankers. If she becomes president, that will remain the case.