Democratic frontrunner Hillary Clinton would let Wall Street banks fail and possibly break them up as president, she told comedian Stephen Colbert on Tuesday night, even though as a senator she voted to bail out the banks in the midst of the 2008 financial crisis.
Appearing for the first time on CBS’s The Late Show, Clinton was asked whether, as president, she would let “too big to fail” banks suffer the consequences of abuses and risky behavior.
“Yes, yes, yes, yes, yes, yes, yes,” Clinton said, adding that under Dodd Frank – the reform bill enacted in 2010 – “we now have stress tests and I’m going to impose a risk fee on the big banks if they engage in risky behavior.”
“But they have to know, their shareholders have to know that yes, they will fail and if they’re too big to fail, then under my plan and others that have been proposed, they may have to be broken up,” she said. “Because if you can’t manage it, it’s more likely to fail.”
Clinton’s new plan for reining in Wall Street is a departure from her more centrist position in 2008, when she voted to bail out the banks, saying in a statement: “The markets must be stabilized to stave off wider turmoil.
“Nevertheless, the urgency of this crisis does not mean that we should offer a blank check to financial institutions or the privileged few.”
At the time, Clinton added her voice to the angry chorus that excoriated the banking elites, railing against their “obscene bonuses and golden parachutes” and saying Congress could not “allow the administration to use the taxpayers like a ‘reset button’.”
In contrast, Clinton’s main rival in the 2016 Democratic presidential primary, Vermont senator Bernie Sanders, voted against the bailout and took to the Senate floor at the time to denounce it: “Under this bill, the CEOs and the Wall Street insiders will still, with a little bit of imagination, continue to make out like bandits.”
“This bill does not deal with the absurdity of having the fox guarding the hen house,” he added, rattling off the issues that remain campaign issues seven years later: stagnant wages, unemployment and infrastructure.
In the years since the 2008, Clinton has drifted toward center on the issue of financial regulations, and her reputation remains tied to the presidency of her husband, Bill Clinton, who oversaw deregulation on Wall Street and who signed the repeal of the Glass-Steagall Act, a Depression-era law that separated commercial banks from investment firms.
The former president has said his repeal of Glass-Steagall cannot be linked to the financial crisis, but the law’s resurrection has become a sensitive question for the former secretary of state, who has declined to endorse its renewal despite the clamor of progressives. Sanders and senators such as Massachusetts’ Elizabeth Warren vociferously argued in favor of reform bills in the mold of Glass-Steagall.
Clinton’s history of support from Wall Street and her cautiousness toward regulation have earned her scorn from Sanders and the third Democratic candidate, former Maryland governor Martin O’Malley. Her plan to regulate the industry, released earlier this month, characteristically walks a centrist path: “risk fees” for institutions deemed “too big to fail” and more powers for regulators, but nothing so far as breaking up the largest banks as Sanders would prefer.
Since stepping down as Barack Obama’s secretary of state in 2013, Clinton has also made millions speaking at Wall Street events, and some of her supporters in the industry have said they feel secure that she has not moved to the left because of the surprising support for her progressive rival.
The former secretary of state’s visit to “the cathedral of Colbert”, as she called his show, did not delve into the technicalities of the securities or mortgage markets, and instead touched on Clinton’s taste in “bad TV” (House of Cards, Madame Secretary), the 1990s and mockery of the 2016 Republican field.
Referring to the current Republican frontrunners, the never-elected duo of billionaire Donald Trump and retired neurosurgeon Ben Carson, Colbert asked: “You can picture either one of them in the office, right?”
“Well,” Clinton replied, “I can picture them in some office.”
