One of the most aggressive advocates for bringing Glass-Steagall back has been Senator Elizabeth Warren, who Clinton has vetted as a possible vice president. Warren has sponsored legislation that would reinstate the law, but it hasn’t advanced in a Republican-controlled Congress. Bank of America and JPMorgan have also faced proposals from shareholders and calls from securities analysts to separate business lines or shrink in size. Neither bank has heeded those demands.
Goldman Sachs’ Chief Financial Officer Harvey Schwartz said Tuesday that he wasn’t worried about recent calls to reinstate Glass-Steagall or other policy proposals for the finance industry that have been made during this year’s presidential campaign.
“This cycle will have a few unique aspects to it versus other presidential cycles," Schwartz said in response to an analyst’s question during a conference call to discuss the bank’s second-quarter earnings. “We don’t see any significant impact in terms of the near-term."
Party platforms are mostly symbolic, having no formal hold over presidential candidates and often including policies that aren’t ever pursued. But Wall Street might consider it slightly alarming that both Republicans and Democrats have now given a nod to Glass-Steagall in their 2016 agendas.
“It is a mistake to simply dismiss the news as a cynical political ploy," said Brian Gardner, an analyst at Keefe Bruyette & Woods. “The risk that Congress will reinstate Glass-Steagall is higher than many investors appreciate."
In the Democrats’ draft platform issued earlier this month, the party called for “an updated and modernized version of Glass-Steagall and breaking up too-big-to-fail financial institutions that pose a systemic risk to the stability of our economy." The draft reflected the influence of Sanders and other progressives by taking a sharp leftward turn from prior years.
Balancing Act
Clinton has had a tough time crafting a middle ground on issues involving the finance industry. She’s faced scrutiny over her ties to firms such as Goldman Sachs, which paid her more than $600,000 for giving speeches. The bank’s employees have also donated to her campaign.
And while Clinton has tried to shore up her standing with the liberal base of the Democratic party by calling for tougher rules for Wall Street, she’s stopped short of calling for a return of Glass-Steagall. Her own plan to stiffen oversight focuses on issues ranging from high-speed trading to derivatives to criminal penalties for bank executives. She has also pledged to defend Dodd-Frank.
Warren’s Glass-Steagall bill is S. 1709.