Has the Republican Party turned on Wall Street?
In a rather surprising development Monday morning, Donald Trump’s campaign manager, Paul Manafort, told a group of reporters that the official GOP platform would include a plank calling for the breakup of large U.S. financial institutions. “There has been some added components to [the platform] that reflect the issues that Mr. Trump has raised during the course of the campaign,” he said, according to the American Banker. “We also call for reintroduction of the platform of Glass-Steagall so that would create barriers between what the big banks can do and avoid some of the crisis that led to 2008.”
This is a rather obvious play to lure disaffected Bernie Sanders voters over to Trump’s side. Glass-Steagall was the Depression-era law separating commercial and investment banking that was repealed under President Bill Clinton in 1999. While one can debate how much its demise contributed to the 2008 financial crisis, many on the left have fixated on bringing it back as the ne plus ultra of financial reform. Sanders, of course, promised to resurrect the statute. Hillary Clinton did not during the primary campaign, arguing instead that Congress and regulators should do more to address dangers lurking in the so-called shadow banking system. This has earned her no shortage of grief from progressives who suspect she may be pandering to Wall Street donors.
Vowing to break up the banks would be a relatively easy way for Trump to capitalize on that skepticism. Doing it with the backing of the party woudl give it a bit more credibility. And what about the fact that the candidate has also said he would deregulate Wall Street by junking the Dodd-Frank financial reforms passed in 2010? Well, nobody ever accused Donald Trump of philosophical consistency. But beyond that, like many in the GOP, Manafort suggests that Dodd-Frank has been a burden on small banks. Bringing back Glass-Steagall, on the other hand, would affect big banks. Back in the real world, it’s a pretty dishonest position. But rhetorically, you can see how they’d square it.
Policy logic aside, the move looks like a rather dim sign for Wall Street. Party platforms aren’t binding, of course. But the authors of the GOP’s document generally represent the conservative movement’s hard-right flank, and with a few notable exceptions, haven’t necessarily taken that many cues from their presumptive nominee. If they’re open to the notion of vivisecting Goldman Sachs and JPMorgan, it could signal that the idea has currency in the party beyond Trump himself. And given that the Democrats’ draft platform also includes a call for a “21st Century Glass-Steagall,” it’s a notion both major American political parties have embraced.
Update, 6:30 P.M.: The RNC has blasted out a final draft of the party’s platform, complete with the section on Glass-Steagall. It comes a bit out of left-field, conspicuously tacked onto the end of long section about President Obama’s alleged abuse of regulatory power.
The current President and his allies on Capitol Hill have used those agencies as a superlegislature, disregarding the separation of powers, to declare as law what they could not push through the Congress.
The Environmental Protection Agency has rewritten laws to advance the Democrats’ climate change agenda. The Department of Health and Human Services has ignored the enacted text of the Affordable Care Act to do whatever it wants in healthcare. Both the Department of Labor and National Labor Relations Board have scrapped decades of labor law to implement the agenda of big labor. The Dodd-Frank law, the Democrats’ legislative Godzilla, is crushing small and community banks and other lenders. The Federal Communications Commission is imperiling the freedom of the internet. We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment. [Bolds mine]
This is sort of amusing: Officially, the Republican party now favors rebuilding the wall between commercial and investment banking, which would lead to the dismantling of the United States’ largest financial conglomerates, even though it’s still decrying just about every other regulatory decision by the Obama administration as gross overreach. We’ll see if Sanders’ fans buy it.
The first five pagraphs of this story have been updated to reflect the final draft of the platform (I cut out a few “ifs”). For the sake of transparency, I’ve left the original text from the end of my article below.
Original: But, here’s the thing. I haven’t been able to find any sign that Manafort is telling the truth at this point. On Monday morning, Republican convention organizers handed out draft text of the platform, and the section on banking includes nothing on bringing back Glass-Steagall. Instead, it spends a lot of time calling on Congress to curtail the Consumer Financial Protection Bureau’s powers, then says:
Republicans believe that no financial institution is too big to fail. We support legislation to ensure that the problems of any financial institution can be resolved through the bankruptcy code. [Note: Dodd-Frank has this. It’s called the living will provision.] We endorse prudent regulation father banking system to ensure that FDIC-regulated banks are properly capitalized [Note: Dodd-Frank also has this] and taxpayers are protected on bailouts. We will end the government’s use of disparite impact theory in enforcing anti-discrimination laws with regard to lending.
And here’s the full section.
Note, there’s nothing in there about chopping banks down to size. It just says no financial institution, no matter how big, is too big to fail. And far as I’ve been able to glean, nothing changed between when this document was handed out and when the platform committee formally adopted it. (I tried calling the RNC to confirm, but the staff in D.C. sent me to an office line in Cleveland that got me nowhere.)
Anyway, it’s possible that Manafort knows something I don’t. Maybe Republicans really want to bring back “Wall Street’s Worst Nightmare,” as Business Insider exaggeratedly put it. Or maybe everybody he’s operating in a fog of confusion because it’s 2016 and nothing politicians or their handlers say means anything anymore. I’ll be sure to add updates as they come in.