Krugman: Why Wall Street Tycoons Are Panicking About the 2016 Election
Paul Krugman weighed in on the differences between Hillary Clinton and Bernie Sanders when it comes to financial reform and regulation in Friday's column. His conclusion: they differ in degrees of toughness, but the starkest contrast is between them and the entire Republican field. Ultimately, his evidence is that when it comes to campaign contributions, the financial sector has never been more Republican.
While Sanders has won the most accolades and fans for his drive to regulate banks and restore Glass-Steagall, Krugman argues that, in some ways, Clinton had "the better case" in Tuesday’s debate.
Mr. Sanders has been focused on restoring Glass-Steagall, the rule that separated deposit-taking banks from riskier wheeling and dealing. And repealing Glass-Steagall was indeed a mistake. But it’s not what caused the financial crisis, which arose instead from “shadow banks” like Lehman Brothers, which don’t take deposits but can nonetheless wreak havoc when they fail. Mrs. Clinton has laid out a plan to rein in shadow banks; so far, Mr. Sanders hasn’t.
This cozy relationship was reflected in campaign contributions, with the securities industry splitting its donations more or less evenly between the parties, and hedge funds actually leaning Democratic.
Everything changed after 2008 financial crisis, however. While most liberals and progressives were dissatisfied with the Obama administration's efforts to rein in the big banks, petulant Wall Street became consumed with rage that they were subject to any reform. That rage is ongoing and has been transferred to all Democrats. Hedge funds have also flipped.
The lopsided giving could be very good news, in Krugman's opinion, since a it "means that a victorious Democrat wouldn’t owe much to the financial industry."