How Democrats Moved Left on Wall Street

Populist economic appeals are now mainstream. That doesn’t mean words will translate into action.

Bernie Sanders and Elizabeth Warren may not end up in the White House, but their efforts to influence the Democratic agenda seem to be paying off. A recently approved draft of the Democratic Party platform strikes a populist tone on Wall Street reform, calling for policy prescriptions championed by the progressive wing of the party. When it comes to the way Democrats talk about Wall Street, what once was fringe has made its way into the mainstream, though that doesn’t mean words will translate into action.

While not binding, what makes it into the platform—and what does not—says a lot about consensus and controversy among Democrats. Notably, the draft endorses a modern version of the Glass-Steagall Act, a Depression-era banking law that Sanders has described as a mechanism for breaking up big banks. Sanders and Warren have both supported reinstating a 21st-century version of the law. “What we are seeing is an aggressive economic populism winning out,” said Robert Borosage, the co-director of the Campaign for America’s Future, a progressive think tank. “The Wall Street provisions in the platform show that. It marks a shift for the party from where it was 20 years ago.”

The shift reflects public sentiment. Americans lost trust in U.S. banks in the aftermath of the financial crisis. According to a 2015 Gallup poll, “few institutions have seen such a steep drop in confidence in recent years.” In 2011, the Occupy Wall Street movement channeled that anger into protest culture. That year, just 36 percent of Americans believed Wall Street helps the economy more than it hurts it, a Pew survey showed, finding that only 29 percent of Democrats shared that view, compared with 49 percent of Republicans. That distrust has not disappeared: During the current presidential-primary season, Sanders and Donald Trump have showed that populist discontent at wealthy elites translates into votes.

Of course, endorsing talking points is a far cry from implementing policy. The draft platform’s call for Wall Street reform embraced by progressives should be seen as an indicator that the idea has widespread support, not as a promise to enact policy. The proposal would not have made it into the platform if it were not deemed politically safe. “The platform is a relatively easy way for so-called mainstream and centrist Democrats to make progressive Democrats feel included without really changing the status quo or ruffling feathers on Wall Street. It’s still just rhetoric,” said Robert Reich, a former secretary of labor under President Bill Clinton who endorsed Sanders during the primary. “But symbolically, the platform gives a sense of where the Democratic Party and the public could be moving. It reveals the current limits of what is acceptable political discourse inside the party.”

Democrats undoubtedly hope to convince voters they will put the interests of everyday Americans ahead of Wall Street. That could be particularly challenging, as well as a key priority, for Hillary Clinton if she is the Democratic nominee given her ties to Wall Street. For her part, the party’s presumptive nominee vows to defend Dodd-Frank, legislation enacted by President Obama in the wake of the recession that is aimed at improving financial-sector oversight. Last year, an economic advisor to the campaign told Reuters that Clinton would not propose reinstating Glass-Steagall, though the candidate has described her Wall Street agenda as “more comprehensive, and frankly it’s tougher” than what Sanders has put forward. “Of course, we have to deal with the problem that the banks are still too big to fail,” Clinton said during a Democratic presidential debate in 2015. “We can never let the American taxpayer and middle class families ever have to bail out the kind of speculative behavior that we saw.”

Whatever Democrats call for in the party platform, don’t expect to see a push for any kind of new financial legislation in the near-term. “Platforms and campaign policy plans play different roles, with platforms occasionally shading into magical thinking,” said Matt Bennett, senior vice president for public affairs at the center-left think tank Third Way. “There isn’t going to be a new, huge financial-reform bill. What we need to do in the real world, as Clinton has made clear, is shore up Dodd-Frank and ensure that it’s preventing the worst Wall Street abuses. That’s something she can achieve as president.”

As Clinton attempts to persuade the public she will be tough on Wall Street, she may also have to contend with her husband’s legacy. Bill Clinton signed a 1999 law that repealed some provisions of the Glass-Steagall Act, and contributed to deregulation of the financial sector. That could haunt Democrats as they try to burnish populist credentials. But it also shows how far the political climate on the left has shifted on Wall Street reform. “Democrats are beginning to reposition themselves along an economic paradigm that’s not traditionally neoliberal,” said David Coates, a professor at Wake Forest University, referring to neoliberalism as an ideology that promotes the idea that “markets work best when regulated least.” “At the same time,” Coates added, “Democrats have upheld the old [neoliberal] paradigm for a long time and remain tethered to it in a variety of ways. The party will have to grapple with that if it wants to move toward a new paradigm.”