Clinton, Warren Still at Odds on Banking Policy

Warren continues to make the case for reinstating Glass-Steagall provisions separating commercial and investment banking.

Sen. Elizabeth Warren and then-Secretary of State Hillary Clinton, on Capitol Hill, January 24, 2013.
AP Photo/J. Scott Applewhite
Eric Garcia
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Eric Garcia
Nov. 4, 2015, 7:49 p.m.

While Hil­lary Clin­ton has de­murred on re­in­stat­ing pro­vi­sions in the De­pres­sion-era Glass-Steagall Act sep­ar­at­ing com­mer­cial and in­vest­ment bank­ing, Sen. Eliza­beth War­ren con­tin­ues to de­fend the idea. Tues­day, she char­ac­ter­ized Glass-Steagall as a means of help­ing middle-class and low-in­come people.

At the Demo­crat­ic pres­id­en­tial de­bate last month, when Clin­ton was asked about re­in­stat­ing Glass-Steagall, the former sec­ret­ary of State said, “My plan is more com­pre­hens­ive.” She said that while con­cerns about banks be­ing too big to fail were val­id, fo­cus was needed on “oth­er play­ers” out­side of the big banks—such as AIG, which was an in­sur­ance com­pany, and Leh­man Broth­ers, which was an in­vest­ment bank.

“I want to make sure we cov­er every­body—not what caused the prob­lem last time but what could cause it the next time,” Clin­ton said.

But at event at the Dirk­sen Sen­ate Of­fice Build­ing high­light­ing Uni­versity of Geor­gia School of Law pro­fess­or Mehrsa Baradaran’s book How the Oth­er Half Banks, War­ren de­fen­ded the no­tion of re­in­stat­ing Glass-Steagall. She said the ques­tion of wheth­er Glass-Steagall “might not all by it­self have been able to stop the fin­an­cial crisis” was the wrong one to ask.

“The way I see it, the ba­sic ques­tion we should be ask­ing about Glass-Steagall is, Why should in­vest­ment banks have ac­cess to your FD­IC-in­sured check­ing ac­counts and sav­ings ac­counts?” War­ren said. “Why is that help­ful to the Amer­ic­an eco­nomy? Why is that help­ful to Amer­ica’s middle class?”

War­ren did not ex­pli­citly cri­ti­cize Clin­ton, but her state­ments il­lus­trate the di­vide between the two. While War­ren signed a let­ter sup­port­ing a Clin­ton can­did­acy, ac­cord­ing to CNN, many pro­gress­ives wanted her to chal­lenge Clin­ton for the Demo­crat­ic nom­in­a­tion be­cause she is per­ceived as be­ing tough on Wall Street.

Clin­ton’s two com­pet­it­ors in the Demo­crat­ic primary, former Mary­land Gov. Mar­tin O’Mal­ley and Sen. Bernie Sanders, have en­dorsed re­in­stat­ing Glass-Steagall, with Sanders tout­ing at the de­bate the fact that he op­posed the ini­tial re­peal dur­ing Bill Clin­ton’s ad­min­is­tra­tion.

Sen. Sher­rod Brown, the rank­ing mem­ber of the Sen­ate Bank­ing Com­mit­tee, who is con­sidered a pro­gress­ive and a crit­ic of too-big-to-fail banks but who also en­dorsed Clin­ton last week, has tried to bridge the gap between the com­pet­ing views.

“I think there are things to do first,” Brown told Na­tion­al Journ­al, such as set­ting high­er cap­it­al stand­ards and get­ting more cred­it in­to com­munit­ies. “I’d look at Glass-Steagall later. I don’t think that should be the first step.”

Still, the fact that War­ren con­tin­ues to push her views may make Clin­ton’s un­will­ing­ness to back re­in­stat­ing Glass-Steagall an on­go­ing stick­ing stick­ing point for pro­gress­ives.

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