‘Too big to fail’ a flashpoint in 2016 race

Too big to fail has emerged as a flashpoint in the presidential race, five years after President Obama signed sweeping financial regulations into law.

Candidates on both sides of the aisle are vowing to end the massive taxpayer bailouts that angered the nation after the 2008 economic collapse, though they differ on their policy prescriptions.

{mosads}Democratic presidential frontrunner Hillary Clinton vowed to “appoint and empower regulators who understand that too big to fail is still too big a problem” during an economic speech in Manhattan on Monday.

Jeb Bush said last month the “systematic risk is perhaps greater now than it was when the law was signed” while talking to reporters in Berlin.

Clinton’s Democratic challenger Sen. Bernie Sanders (I-Vt.) said Friday that “if an institution is too big to fail, it is too big to exist” while endorsing a policy from Sen. Elizabeth Warren (D-Mass.) that’d aims to break up big banks.

And Republican presidential candidate Carly Fiorina, the former CEO of Hewlett Packard, told Breitbart in May that the 2010 Dodd-Frank Wall Street Reform law “=”has taken ten banks too big to fail and turned them into five banks too big to fail.”

The rhetoric underscores how candidates are looking to tap into voters’ deep-rooted frustration and angst that’s still prevalent seven years after the financial crisis, said Jason O’Donnell, chief investment officer at Bluestone Financial Institutions Fund.

“The candidates are playing on the emotion of the public,” O’Donnell said, noting that the slow pace of the economic recovery has left voters angry.

“They may want different solutions to ‘too big to fail,’ but they both hate it,” said Michael Norbert, a financial services research fellow at the conservative Heritage Foundation. 

On policy, liberals have argued that Dodd-Frank didn’t go far enough to prevent more taxpayer bailouts. Conservatives argue that Dodd-Frank went too far and ended up codifying too big to fail.

“It’s very popular because on both the left and the right it plays into many cases the extremist narrative that drive that smaller percentage of people who turn out in presidential primaries,””said Richard Farley, author of Wall Street Wars: The Epic Battles with Washington that Created the Modern Financial System.

Farley argued that politicians aren’t capturing the whole truth of the ‘too big to fail’ debate, noting the big banks are “generally safer” than smaller financial institutions.

“But it’s easier, I guess, for politicians to attack the fat cats on Wall Street,” Farley said.