Wall Street’s unhappiness with the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, coupled with the private equity pedigree of Mitt Romney, made financial reform and the role of government in regulating capital markets a genuine campaign issue during the 2012 presidential election. What can we expect from the Republican Party this time round? As top GOP candidates prepare for the first televised debate in the 2016 election, to be held on Fox News on Thursday night, the answer on the evidence so far is: Not much.
Wall Street’s power brokers backed Barack Obama heavily in the 2008 election, but disquiet over the clampdown on the industry that followed the 2008–’09 financial crisis led many to defect to Romney in 2012. The financial sector donated more than $70 million to Romney, whereas Obama received just $21 million, according to the Center for Responsive Politics.
This time around the favorites of the financial establishment are former senator and secretary of State Hillary Clinton and former Florida governor Jeb Bush. When ultraconservative Texas Senator Ted Cruz, a Republican, spoke at Delivering Alpha, the conference co-hosted by Institutional Investor and CNBC in July, many of those in the audience laughed mockingly at his more demagogic lines, which mixed vague anti–Wall Street sentiment with a call to abolish the Internal Revenue Service.
Fox News announced the ten candidates who will participate in Thursday’s debate late on Tuesday. Figuring out where those candidates stand on matters of policy that affect Wall Street — financial regulation primarily, but also the position and authority of the Federal Reserve — is no easy task, however. We’re still at the stage of the primary season when rhetoric trumps substance — it’s possible that stage will extend right up to Election Day, of course — and most of the candidates have set out only rudimentary positions on finance.
Donald Trump, the runaway leader in the polls so far, has been silent on financial issues, preferring instead to focus on his core strengths: calling Mexican immigrants “rapists,” pledging to stand up to China and “make America great again” and giving out South Carolina Senator Lindsey Graham’s cell phone number. Bush, who consistently polls second, has offered a bit more. “We have more banks with more concentrated assets in the United States, and the systematic risk is perhaps greater now than it was when the law was signed,” Bush said of Dodd-Frank in June. This may sound like a call for stricter oversight, but Bush was careful to add, “I would beware of regulations in general. I think they need to be thoughtful.”
The GOP candidate with perhaps the most evolved views on financial reform to date is Rick Perry. Surprisingly, the former Texas governor’s platform would not look out of place on Massachusetts Senator Elizabeth Warren’s web site: He supports stronger capital requirements for systemically important banks, and has hinted at something like a return to Glass-Steagall. On other points, he sounds more predictably Wall Street–friendly: Asset management firms, for instance, should be exempt from Dodd-Frank, he declares on his web site. The problem for Perry is that he won’t be participating in Thursday night’s first debate; Fox News judged him to be polling in 11th place among the 17-strong field. He will, however, be able to participate in the also-rans’ debate for candidates 11 through 17 that will precede the main event. How damaging the absence from the main stage will be for these candidates remains to be seen.
Cruz and Ohio Governor John Kasich have expressed some sympathy with Perry’s populist anti–big bank stance. “I’ll tell you the problem with Wall Street,” Kasich said on NBC’s Meet the Press earlier this year. “It is too much about ‘I gotta make money.’”
But others hew to a more conventional antibureaucratic, pro-finance line, which presents the novel prospect of a Republican primary race in which some candidates are ostensibly in favor of stronger regulation of Wall Street, and others vehemently oppose it. Kentucky Senator Rand Paul, who did make the cut for Thursday’s main event, wants Congress to audit the Fed and has made regular noises about counteracting the effect of overly burdensome regulation, including in finance. He has yet to offer any detail of what the latter might entail, however. New Jersey Governor Chris Christie is another who has been giving the antiregulation drum a workout. “Regulation should be used to implement actions explicitly authorized by statute,” Christie declares on his web site, slightly bafflingly. (Has anyone ever seriously argued that regulation should be used for anything else?) He has also proposed a “Regulatory Zero” rule, whereby “for each new rule that is imposed, one of equal cost must be sunsetted or removed.” Again, nothing is said as to how this might relate to finance.
None of the remaining candidates in Thursday’s debate — Florida Senator Marco Rubio, Wisconsin Governor Scott Walker, former Arkansas governor Mike Huckabee and retired surgeon Ben Carson — have had anything of note to say on financial issues. Most of their interventions on money matters have stuck to the orthodox conservative script of tax cuts and lower spending. There’s a lot of macro policy there, but scarcely any micro.
What does it say that only peripheral candidates — Perry, Christie, Paul — have spoken up, whereas Trump, Bush, Walker and Rubio, largely seen as the front-runners at this stage, have so little to say on Wall Street? Partly, this reflects the fact that financial reform’s urgency has evaporated over the past several years. In 2012 memories of Occupy Wall Street were fresh, Dodd-Frank was still a live issue, and many of the statute’s most important provisions had yet to be turned into binding regulation.
Today that’s less the case, and the financial industry has begun to adapt to the reality of waves of new rules. Presidential campaigns are usually given over to simple debates over big, easily digested questions of national security or economic policy. It required a global financial crisis and legislation on the giant scale of Dodd-Frank for the slightly remote, wonkish area of financial regulation to become a real campaign issue; with much of the work of Dodd-Frank complete and the U.S. economy now restored to a path of moderate growth, it may be inevitable that financial policy no longer commands the stump-speech stage to quite the same degree.
That could all change, however, if Trump maintains his early momentum into the primaries, or if one of the Establishment’s preferred candidates, such as Bush or Rubio, is pressed to provide more detail on specific policy preferences. For now, though, this sprawling Republican primary caravan looks set to stagger on, partisans of a Romneyesque light-touch approach to regulation sharing the road with antibank populists.
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