Democrats and Wall Street

I've criticized Paul Krugman before. But it's usually been when he gets out of his lane and starts commenting on politics instead of economics. On the latter, he's someone I always pay attention to. And so, given the differences we've seen between Clinton and Sanders on Wall Street reform, I was interested in Krugman's take. Here's what he wrote about it today.

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.

Krugman then goes on to address the one question some liberals have about Clinton: can we trust her to actually follow through? To answer that one, he provides some history about where Wall Street donors have placed their bets when it comes of campaign contributions. He recounts that there was a time that financiers split their money pretty evenly between Democrats and Republicans.

But then came the financial crisis of 2008, and everything changed.

Many liberals feel that the Obama administration was far too lenient on the financial industry in the aftermath of the crisis...

But the financiers didn’t feel grateful for getting off so lightly. On the contrary, they were and remain consumed with “Obama rage.”

The result:

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.

Krugman's calm reasoning probably won't break through the narrative currently embraced by some on the left that only an insurrectionist presidential candidate can break the grip that Wall Street has on our politics. But the truth is...President Obama already did that in 2010 (at least when it comes to presidential races). And with her proposals to both defend and build on that, Clinton has committed to carrying that forward.