WASHINGTON, DC – There is now near-unanimity that the United States’ Dodd-Frank financial reform legislation, enacted in 2010, did not end the problems associated with some banks being “too big to fail.” When it comes to proposed solutions, however, no such consensus exists. On the contrary, financial regulation has become a key issue in November’s presidential and congressional elections.
So who has the more plausible and workable plan for reducing the risks associated with very large financial firms? The Democrats have an agreed and implementable strategy that would represent a definite improvement over the status quo. The Republican proposal, unfortunately, is a recipe for greater disaster than the US (and the world) experienced in 2008.
On the Democratic side, Hillary Clinton’s campaign materials and the party platform point to a detailed plan to defend Dodd-Frank and to go further in terms of pressing the largest firms to become less complex and, if necessary, smaller. Banks must also fund themselves in a more stable fashion. If Clinton wins, she will draw strong support from Congressional Democrats – including her rival for the Democratic nomination, Bernie Sanders, and his fellow senator, Elizabeth Warren – when she pushes in this direction.
Some commentators claim that Clinton has been “pulled to the left” on financial regulation during the campaign. But if you look carefully at her statements during this election cycle, they have been, from the very beginning, almost identical to what Warren has been seeking for the past half-dozen years. And these goals are perfectly aligned with what all responsible officials want. Everyone in their right mind wants to prevent the largest banks from getting out of control, shifting risk into shadowy, unregulated activities (on or off their balance sheet), and fleecing consumers.