[Last week], Senator Elizabeth Warren undertook a big act of financial rabble-rousing, by introducing a bill that would reinstate key provisions of the 1933 Glass-Steagall Act that were repealed in 1999. The new bill would essentially force big bank holding companies like Citigroup and Bank of America to split in half — commercial banking on one side, investment banking on the other — and hypothetically make the entire banking system safer and less crisis-prone by (a) shrinking banks, and (b) reducing the amount of risky stuff that goes on at the commercial banks where normal people keep their savings accounts. She’s calling this bill the “21st Century Glass-Steagall Act” and promoting it using the slogan “Banking should be boring.”…
It’s the long-game theory.
This theory says that Senator Warren isn’t trying to change individual laws, so much as move the entire political discussion of the financial sector to a different rhetorical arena and force other legislators to join her there. In this theory, Warren’s anti-bank bills and activism aren’t meant mainly for her constituents in Massachusetts, for the Internet audience, or even for Wall Street. They’re directed to her fellow legislators. And their message is simple: On issues involving Wall Street, the center isn’t where you think it is.
Wall Street, and finance generally, is one of the issues where the views of Congress have traditionally differed sharply from the views of the masses. Most surveys show that a vast majority of Americans support tougher regulation on banks; yet, because the financial sector’s campaign contributions and lobbyists have an outsize impact on Congress, the debate about how to rein in Wall Street excess has taken place on the financial sector’s turf. On Main Street, around 60 percent of people think Wall Street banks are too big and should be broken up. But to find that position in Washington, you’ve typically had to look to the leftmost fringes…
The truth is that many senators don’t know what capital ratios or rate swaps are, never mind being able to write legislation around them. And in the same way that Wall Street’s informational advantage gives it an automatic edge over ordinary investors, Warren’s knowledge of the financial markets gives her automatic authority in Congress. Even if she’s a freshman senator, her knowledge has allowed her to coalition-build like a veteran. And that ability — not a single bill or years of Internet fame — is what could make her quest to reform Wall Street successful.
Bankers and their lobbyists shouldn’t be worried that Senator Warren’s new Glass-Steagall legislation will pass. It won’t. And passing is largely beside the point. The more interesting achievement is that she’s managed to bring ideas like these into the realm of political acceptability and get support from both sides of the aisle for them. Warren’s “make banking boring” campaign may look silly to finance-world cynics, but it’s entirely possible that she’s engineering a new political consensus that will do much more damage to Wall Street in the long term than simply breaking up a few banks.
This is what every Democratic office holder should be doing, on a thousand different issues. I’m so glad I can say that this woman is my Senator.