WASHINGTON – The Democratic presidential candidates sparred over Wall Street reform Tuesday evening, debating how to best tame the banking industry roughly seven years after the financial crisis.
The contenders faced off at the party’s first primary debate in Las Vegas, providing the most substantive discussion of banking policy so far this election cycle. Republicans have so far hosted two debates, but the Dodd-Frank Act and Wall Street reform have received little attention by the GOP challengers.
The top three Democratic candidates, Sen. Bernie Sanders of Vermont, former Secretary of State Hillary Clinton and former Maryland Gov. Martin O’Malley, were careful to highlight areas of disagreement on financial policy, though they largely stuck to previous talking points.
“The plan that I have put forward would actually empower regulators to break up big banks if we thought they posed a risk,” said Clinton, referring to the banking plan she released last week.
Clinton acknowledged that “of course we have to deal with the problem that the banks are still ‘too big to fail,’” but she continued to steer clear of explicit efforts to break up the largest financial institutions, a popular call to action for both Sanders and O’Malley.
The Clinton plan would purportedly give regulators more power to unwind the biggest banks and pursue Wall Street executives involved in illegal activity, though observers have noted that the changes would largely amount to incremental tweaks to existing Obama administration efforts.
Clinton, who has already received considerable Wall Street funding, also reiterated her warnings about the impact of so-called shadow banking, saving some of her toughest criticism for financial players outside of the formal banking system.
“There's this whole area called ‘shadow banking.’ That's where the experts tell me the next potential problem could come from,” she said. “If only you look at the big banks, you may be missing the forest for the trees.”
Sanders, meanwhile, went on the attack, reiterating his call to break up the largest financial institutions and citing the role that lobbying interests, the Federal Reserve and even Clinton’s husband President Bill Clinton played in the 1990s in the run-up to the financial crisis.
“Check the record. In the 1990s – and all due respect – in the 1990s, when I had the Republican leadership and Wall Street spending billions of dollars in lobbying, when the Clinton administration, when Alan Greenspan said, ‘what a great idea it would be to allow these huge banks to merge,’ Bernie Sanders fought them, and helped lead the opposition to deregulation,” said the Vermont lawmaker, a self-described democratic socialist.
He added: “Let us be clear that the greed and recklessness and illegal behavior of Wall Street, where fraud is a business model, helped to destroy this economy and the lives of millions of people.”
O’Malley also pushed Clinton on her lack of support for reinstating the Glass-Steagall Act, a Depression-era law separating commercial banking from riskier activities that was repealed in the 1990s. Advocates, including Sen. Elizabeth Warren, D-Mass., want to bring back the measure to help tame the biggest banks.
“You are not for putting a firewall between this speculative, risky shadow banking behavior,” he said. “I am, and the people of our country need a president who's on their side, willing to protect the Main Street economy from recklessness on Wall Street.”