Sen. Elizabeth Warren (D-Mass.) has thrust anti-big bank policy into the 2016 presidential Democratic primary, presenting a new political challenge for front-runner Hillary Clinton.
Warren’s re-introduction on Tuesday of Glass-Steagall, which would require big banks to split up commercial and investment banking, is popular among the liberal base.
Proponents contend that former President Clinton’s repeal of the legislation in 1999 was part of deregulation that contributed to the 2008 economic collapse, an allegation that many economists — and the Clintons — vehemently dispute.
“Getting rid of Glass-Steagall didn’t have anything to do with the crash. … Everybody acts like I sat in a closet and said, ‘What can I do for Wall Street today?’ ” Bill Clinton said at a financial conference last year. “Let me remind you, that bill passed 90-8 in the Senate.”
One of the eight senators who voted against was Bernie Sanders (Vt.), now a Democratic presidential candidate who has been steadily gaining on Hillary Clinton in the polls. Maryland Gov. Martin O’Malley, another Democratic challenger, also supports Glass-Steagall.
“It’s essential in preventing another crash,” O’Malley tweeted earlier Tuesday, while thanking the bill’s other co-sponsors: Sens. John McCain (R-Ariz.), Maria Cantwell (D-Wash.) and Angus King (I-Maine).
“If that law hadn’t been repealed in 1999, the crash would have been contained,” O’Malley wrote in a March 2015 op-ed for The Des Moines Register.
For liberals who are already wary of Clinton’s ties to Wall Street, Warren’s reintroduction of the bill could bring the issue to the campaign trail, even though the bill itself has virtually no chance of becoming law this Congress.
It gives her challengers an issue showing daylight between themselves and the Clinton, who retains a formidable lead in the polls, despite Sanders’s rise.
“The progressive wing of the party is getting louder and louder, and as such I expect both [Sanders and O’Malley] will try to draw a contrast with Hillary Clinton when it comes to Wall Street,” said Democratic strategist Jim Manley.
Robert Borosage, co-director of the liberal Campaign For America’s Future, praised Sanders and O’Malley for supporting Glass-Steagall.
“We don’t know where Hillary stands. Understandably she’s reluctant to choose between her donors and the activists base of the party,” Borosage said. “But just as with the trade debate, silence speaks loudly. You can’t be a ‘champion of everyday people’ and duck taking a stand on fundamental challenges facing the country.”
But Tony Fratto, a partner at the D.C.-based business consulting firm Hamilton Place Strategies, dubbed the bill “irrelevant.”
“It went nowhere before and it’s going nowhere again. It’s hard to take seriously a proposal that Senator Warren herself concedes would not have prevented the crisis,” Fratto said.
Still financial reformers heralded the legislation.
Adam Green, co-founder of the liberal Progressive Change Campaign Committee, said that the bill’s re-introduction “is great news and a reminder the Wall Street’s irresponsible actions deprived millions of people of their homes and life savings.”
“Wall Street reform should be among the economic populist issues at the center of the 2016 debate, we hope to see bold proposals from presidential, Senate and House candidates,” said Green, who is pushing for Democratic candidates to adopt a more progressive agenda, similar to Warren’s.
Top policymakers at the Federal Reserve have argued that Glass-Steagall wouldn’t have prevented the 2008 crisis and that its re-introduction would not prevent “too big to fail” financial institutions from receiving taxpayer bailouts.
Warren’s re-introduction of the legislation illustrates the grassroots disdain for the taxpayer bailouts from the crisis that still exists seven years after the collapse.
“Despite the progress we’ve made since 2008, the biggest banks continue to threaten our economy,” Warren said in a statement. “The 21st Century Glass-Steagall Act will … make our financial system more stable and secure.”
Warren has been reluctant to praise Clinton so far this election cycle. In contrast, she lauded Sanders in an interview last month with The Boston Herald.
“Bernie’s out talking about the issues that the American people want to hear about,” she told The Herald. “I love what Bernie is talking about. I think all the presidential candidates should be out talking about the big issues.”
— This story was updated at 6:24 p.m.