Friday, October 16, 2015

Point: Sanders vs. Clinton differences small relative to differences with GOP

Psychological research tells us that an external threat tends to promote cohesion among group members thus blurring intra-group differences. Similarly, large differences between perceptual categories tend to reduce the perceived differences within categories. So it is with the difference between Bernie Sanders and Hillary Clinton on the matter of big banks, big money influence on Wall Street, and the positions of the GOP candidates.

Paul Krugman in the NY Times explains.

Hillary Clinton and Bernie Sanders had an argument about financial regulation during Tuesday’s debate — but it wasn’t about whether to crack down on banks. Instead, it was about whose plan was tougher. The contrast with Republicans like Jeb Bush or Marco Rubio, who have pledged to reverse even the moderate financial reforms enacted in 2010, couldn’t be stronger.

For what it’s worth, Mrs. Clinton had the better case. 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.

But is Mrs. Clinton’s promise to take a tough line on the financial industry credible? Or would she, once in the White House, return to the finance-friendly, deregulatory policies of the 1990s?

Quite possibly not. Krugman notes that the big money from big finance is flowing to the PACs supporting GOP candidates. And that does not obligate Sanders and Clinton to do any favors for the big money guys.

... financiers bitterly resent any constraints on their ability to gamble with other people’s money, and they are voting with their checkbooks. Financial tycoons loom large among the tiny group of wealthy families that is dominating campaign finance this election cycle — a group that overwhelmingly supports Republicans. Hedge funds used to give the majority of their contributions to Democrats, but since 2010 they have flipped almost totally to the G.O.P.

As I said, this lopsided giving is an indication that Wall Street insiders take Democratic pledges to crack down on bankers’ excesses seriously. And it also means that a victorious Democrat wouldn’t owe much to the financial industry.

... while there are some differences in financial policy between Mrs. Clinton and Mr. Sanders, as a practical matter they’re trivial compared with the yawning gulf with Republicans.

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