John Kasich, a former Lehman Brothers banker, seemed unaware that FDIC insurance protects ordinary depositors at failing commercial banks. Ben Carson, asked whether the biggest banks should be broken up, said no, but also that they shouldn’t be allowed to “enlarge themselves at the expense of smaller entities,” then added some word salad about low interest rates and 18th-century entrepreneurship and the cost of soap that did not signal deep knowledge about the banking sector. Marco Rubio claimed that new government regulations have increased the size of the biggest banks, when in fact new surcharges for the largest institutions are encouraging megabanks to get smaller. It’s true that JP Morgan Chase, Bank of America and Wells Fargo are larger than they were before the crisis, but that’s mostly because they absorbed Bear Stearns, Washington Mutual, Countrywide Financial, Merrill Lynch and Wachovia during the crisis, helping to prevent a financial cataclysm from becoming a financial calamity.
One of the under-appreciated issues of the presidential campaign is the degree to which Republican candidates want to go easy on Wall Street, the big banks, and the financial industry in general. Eight years after the start of the Great Recession, and the crash that caused a global crisis, GOP White House hopefuls genuinely seem to believe Americans are ready to scale back safeguards and layers of accountability.
This was certainly the case in last night's debate. Slate's Jamelle Bouie noted this morning, "In several places, the candidates showed disturbing ignorance of basic facts of the American economy.... [Jeb] Bush attacked Dodd-Frank financial legislation for reducing capital requirements for banks, when the law does the opposite."
Politico's Michael Grunwald went further, noting the fact that the Republican field didn't seem altogether comfortable discussing the issue.
The Washington Post's James Downie added, "Rubio's answer on bank size and regulation may have been the wrongest answer in any debate so far."
The Dodd-Frank financial regulatory reform law came up several times, but only as a target for condemnation. Carly Fiorina, for example, falsely argued that the government was responsible for the 2008 disaster and she has no use for the public-sector solution: "I think what's interesting about Dodd-Frank is it's a great example of how socialism starts. Socialism starts when government creates a problem, and then government steps in to solve the problem. Government created the problem."
Rubio added, "We need to repeal Dodd-Frank as soon as possible."
In each instance, the audience in Milwaukee seemed impressed with the rhetoric, but I'd be curious to know more about the attitudes of the American mainstream.
Are there really wide swaths of voters in the United States clamoring for a presidential candidate vowing to go easy on Wall Street and the big banks? Just how much of the electorate is thinking, "There are simply too many protections in place for consumers and investors, so make it easier for the financial industry to do as it pleases"?