Why GOP Candidates Are Silent on Banking Ahead of 2016

WASHINGTON — For those wondering where the presidential candidates stand on key banking issues, the answer remains mostly a mystery for those on the Republican side of the aisle.

Just two presidential election cycles after the financial crisis, Democrats continue to rail against Wall Street and large banks, while the GOP candidates have largely ignored the issue.

That may start to change Wednesday, when CNN hosts the second Republican primary debate, but detailed policy stances on banking are unlikely to emerge.

"Wall Street reform is red meat rhetoric for Democrats and a second-tier issue for Republicans," said Edward Mills, a policy analyst at FBR Capital Markets.

Several Democratic contenders, Sen. Bernie Sanders, D-Vt., and former Maryland Gov. Martin O'Malley, already have banking policy positions on their campaign websites that are critical of the largest financial institutions.

"These institutions have acquired too much economic and political power, endangering our economy and our political process," Sanders says on his website, calling for the breakup of the largest banks.

O'Malley has pushed to reinstate the Glass-Steagall Act, which separated commercial banking from riskier activities, and end "too big to fail" through living wills and higher capital requirements, as laid out in his detailed proposal.

Even frontrunner Hillary Clinton has discussed reining in "excessive risks on Wall Street" and curtailing the so-called revolving door between the private sector and government. Many note that the more liberal candidates have pushed Clinton to the left on banking issues — at least for the duration of the primaries — though she hasn't yet called for busting up the largest institutions.

But on the Republican side, financial policy remains very much on the backburner. There are more than a dozen GOP candidates vying for the nomination, meaning that name recognition remains the crucial factor at this stage. That means focusing on hot-button issues like immigration and gay marriage that animate the party's primary voters.

"You have to do what it's going to take to get yourself on TV," said Mills.

Mark Calabria, director of financial regulation studies at the Cato Institute, argues that the Democratic focus on banking ties to deeper party values — reducing income inequality and the importance of government intervention. As such, "Wall Street reform" is used as catchall for a litany of concerns with markets and the economy.

"For many in the Democratic base, Wall Street is a short term for everything you hate — it's about executive compensation and Wal-Mart and financial capitalism," he said. "It's much broader than concerns about the Volcker Rule and proprietary trading."

Sen. Elizabeth Warren, D-Mass., an outspoken advocate of banking reform, has also galvanized party progressives. The freshman lawmaker has repeatedly said she's not running for president, but she will continue to set the tone of the race on the Democratic side.

"But for Warren, I don't think we'd be talking about bank regulatory issues as much as we are," said Mills.

By contrast, the issue is trickier for conservatives to navigate. As the party of small government, none of the candidates wants to find themselves in the position of pushing for too much intervention from Washington, leaving fewer remedies to promote. It's notable, however, that no candidates have gone out of their way to defend Wall Street, either.

"Electoral politics is not fertile ground for nuanced debates," said Brian Gardner, a policy analyst at Keefe, Bruyette & Woods. "The whole Wall Street reform issue is a very blunt instrument — it could come to hurt a candidate on the Republican side if they're accused of being pro-big-government."

Moreover, regulators are deep into the implementation of Dodd-Frank, and fights over the right level of bank capital are esoteric and hardly good for a sound bite on the national stage. As such, the comments so far have tended to be relatively isolated.

Sen. Marco Rubio, R-Fla., touched on the crisis-era law at the first Republican primary debate last month, warning that Dodd-Frank is "eviscerating" small banks and businesses.

Former Gov. Bush and Donald Trump have called for ending the "carried interest" tax loophole for hedge fund managers. Bush has criticized Dodd-Frank for increasing systemic risk, while Trump has said that the law "totally stifles business." Wisconsin Gov. Scott Walker and Carly Fiorina have warned Dodd-Frank should be repealed. Ohio Gov. John Kasich, who previously worked at Lehman Brothers, criticized Dodd-Frank and Wall Street alike, saying there's "too much greed on Wall Street." Ben Carson, meanwhile, has similarly criticized banking regulation and the industry itself, though he's also come out in support of Glass-Steagall, in line with some of his Democratic competitors.

That said, there's still been little in the way of detailed proposals or discussions from many in the field. None of the top eight Republicans — Bush, Trump, Rubio, Kasich, Fiorina, Cruz, Carson or Walker — responded to requests for detailed policy positions.

Going forward, candidates are likely to continue experimenting with different tactics through the primary season and into the general election to find what sticks with voters.

Former Texas Gov. Rick Perry, for example, gave a surprisingly detailed address on banking regulation earlier this summer, pushing for industry divides like Glass-Steagall and higher capital requirements. Perry dropped out of the race over the weekend due to a lack of campaign funds, but analysts said that others are likely to replicate his approach as they look for messaging that works.

"I think you're going to continue to see others do what Perry is doing, which is testing the waters," said Calabria. "Candidates are going to figure out what resonates with the base and go with it."