Sanders’s plans drew praise from Warren, who tweeted her support for his proposals while diplomatically noting that all three Democratic candidates were strong on Wall Street reform. Gunnel highlighted an analysis from Guggenheim Partners, an investment firm that said Sanders’s agenda would have “radical impacts.” “We continue to believe Clinton would be one of the better candidates for financial firms, as she is pushing concrete reforms where one can understand the downside risk rather than more radical overhauls,” the firm wrote, in a statement that undoubtedly warmed the heart of the Sanders high command.
The politics of Clinton's play are fairly easy to divine. By picking a fight over shadow banking, she can distract attention from Sanders’s focus on his more populist proposals to break up the banks and reinstate Glass-Steagall, which for many progressives is a sorer spot on Bill Clinton’s legacy than even his impeachment. Clinton also is attacking Sanders’s perceived strength, knowing that if she can dent him there, the rationale for his challenge to her becomes much weaker. (That she’s attacking at all, however, might indicate that she’s more worried about Sanders’s standing in Iowa and New Hampshire than her commanding lead in national polls would suggest.)
But what’s interesting in the divide over financial regulation is that while Clinton has adopted some of the more popular items on the progressive wish list—debt-free college, expansive proposals on immigration, gun-control, and criminal-justice reform—she is relying on a wonkier approach to Wall Street reform. Sanders delivered red meat to the crowd in Manhattan, drawing cheers for his denouncements of “greed” and “usury,” his call for a financial-transactions tax, and his consumer-focused plans.
But Clinton’s detailed plans have drawn equal if not greater praise from liberal economists who say she is targeting areas most in need of oversight, in ways that don’t require the passage of major legislation through a hostile Congress. And in 2012, even Warren suggested that the demise of Glass-Steagall was not the main driver of the financial collapse, adding that she focused on it in large part because it was an easier issue for the public to understand. Austan Goolsbee, the former chairman of President Obama’s Council of Economic Advisers, criticized Sanders’s break-’em-up approach to shadow banks, saying that more targeted regulations were needed.
In many respects, the fight over shadow banking is like the broader philosophic divide between the go-big-or-go-home Democratic socialist and the more pragmatic, work-within-the-system Clinton. But while she has tagged Sanders’s ideas as simply too costly or unrealistic in other areas (like health care, college financing, and infrastructure), she is making a more assertive case on financial reform. Her proposals, she has argued, are both more targeted and tougher. In a political climate in which voters in both parties are responding to messages of economic populism, she isn’t risking much as she looks to a general-election debate. And even if Clinton might not win over progressives on a core Sanders issue, she’s really just trying to narrow the gap.