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Democrats clashed over banking reform Tuesday night during the party's first primary debate, underscoring the sharp divide with GOP candidates on Wall Street issues.
October 14 -
Democratic candidate Hillary Clinton's financial reform plan is far less ambitious than other Democrats' proposals but would still be a tough sell in a Republican-controlled Congress.
October 8 -
As the 2008 financial crisis fades into memory, it has become increasingly unlikely that any bankers or traders involved will see jail time. But while no individuals were ever charged with a crime, the feeling that the financial industry got away scot-free will affect the 2016 presidential race and beyond.
August 19
Banks rarely receive positive attention during presidential election campaigns. This campaign season likely will be particularly tough. Jim Smith, the former comptroller of the currency and longtime banking industry observer, recently told me he has never witnessed as vituperative environment for banking as he is seeing this year.
But there are ways for bankers to cope with the campaign rhetoric without resorting to mistakes business leaders make in the face of a threat to their reputations. Bankers can take comfort in knowing that this happens in every election cycle. Anger persists, if somewhat diminished, over banks' perceived role in the last crisis. But other core factors — ranging from classic campaign strategy to the industry's electoral footprint — also contribute to the negative perception in election seasons.
Candidates can expand their support by showering promises and praise on broad constituencies — senior citizens and homeowners, for example — while targeting industries for negative campaigning in areas where economic resources and voters are concentrated.
There is no better example of this than the perpetual pummeling of Wall Street during presidential election years, almost none of which is followed up with meaningful reform. This pattern dates back to when Teddy Roosevelt rode to the presidency in part by promising to clean up Wall Street. Roosevelt grew up in a privileged environment just blocks from Wall Street. His decision to single out the financial sector spoke equally of concerns about economic concentration and of the political vulnerability of concentrated economic strength in an election year. Big oil often receives the same treatment outside of oil producing states such as Texas.
Bankers face another fundamental challenge best described by the estimable Paul Nadler, a longtime American Banker columnist and Rutgers University banking professor. He summed up the industry's political challenge by saying, "You bankers keep wanting to be loved. But remember, not only do you lend money, but you want it to be paid back. Who could love such a person?" This highlights the challenge of being in a business that does not readily generate warm and cuddly feelings from its customers.
While most of America's 6,000-plus banks serve markets far from Wall Street, banking still is a relatively concentrated industry in terms of both financial resources and voters. For example, banking still does not match the grassroots clout of the insurance industry or the credit unions, which are not targeted in elections. Former Senate Banking Committee Chairman Jake Garn, who led the committee in the eighties, regularly reminded banks that while America had (at that time) 13,000 banks, the insurance industry had 13,000 independent agents in New Jersey alone.
So how should banks and bankers respond?
The first thing is to avoid the natural desire to run promotions to soften the public perception of banks. Over my many years in and around banking I have observed millions of dollars spent on campaigns to warm the hearts of the general public toward bankers. These ads have invariably warmed the hearts only of bankers, with minimal impact on the public.
Bankers should instead promote their financial strength and safety, which are widely acknowledged. When the general public decides who it wants safeguarding its money, bankers are the winners. Bank deposits and bank lending had increased by 5% as of the June 30, 2015, call reports. Further, banks remain both well-capitalized and profitable despite operating in a challenging interest-rate environment.
Bankers could also play an important role in clearing some of the fog of campaign rhetoric on key issues. As in every campaign season, there are issues now being raised where bankers have a unique perspective to contribute to the dialogue. For example, while the debate over the nation's fiscal situation tends to produce extreme views on both the left and right, banks can provide the public with a nuanced view about the necessity of, over time, balancing spending with revenue. Further, as bankers provide much of the capital for small businesses, the question of "where jobs are created" is one that bankers are well suited to address.
When bankers focus on contributing to the understanding of key economic issues they make very important contributions to both our economy and the strength of our representative democracy.
Mark W. Olson is chairman of Treliant Risk Advisors LLC and can be reached
