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.
Eric Garcia is a staff correspondent for National Journal. He previously was a transparency reporter for MarketWatch, where he reported on financial regulation issues. His work has also appeared in the Southern Political Report, Salon, the American Prospect and the New Republic. He is a graduate of the University of North Carolina at Chapel Hill, and covered politics for its campus paper, the Daily Tar Heel.