When Hillary meets Bill's legacy

And what else could any other American politician say when faced with that question? You can’t sound pro-bank and win a presidential election these days – not after 2008. But it’s what she will do if elected that actually matters. The banking lobby in the United States is perhaps the biggest and most powerful anywhere. Before an election, candidates will say one thing, but once in office, the reality hits home. That reality still calls for harsh rhetoric, but a head-on collision between those in power and the banks is unlikely. The most we can expect to see is a “pillow fight” designed to convince the public that the politicians do care.

And talking of pillow fights, it’s worth noting that when Bill Clinton became president, it was still illegal in the United States for commercial banks to merge with investment banks and insurance companies. Legal changes advocated by him led to many things, including the proliferation of “too-big-to-fail” financial institutions. Should a woman undo the work of her husband? Well, in this brave new world, feminists would answer “Yes, no problem.” Politically speaking, though, Hillary going against Bill would raise a lot of questions.

Long story short, American politicians helped bring the US economy to near meltdown. Think of the American financial system as an oil tanker. The big ship once had watertight compartments to prevent oil from sloshing around and sinking the vessel. Ripping out the safety doors made the ship extremely vulnerable. Loosening the screws of regulation (and some cases brazen deregulation) saw the end of watertight compartments. That tempted those at the very top of the financial sector to gamble heavily 

with other people’s money – or simply to cheat. The rest is history.

Hillary Clinton now says that American banks won’t be allowed to get too big, citing tightened legal measures and restrictions. However, her stance on the separation of commercial from investment banks is murky to say the least. She’s unlikely to resurrect the Glass-Steagall Act, which was supposed to ensure “watertight bulkheads” between those two banking compartments. Instead, if she becomes captain, the ship will likely be powered by supposedly more effective engines capable of navigating rough seas, but the oil will still slosh around.

Like it or not, banks are the foundation of capitalism in America and elsewhere. That status hasn’t changed even after the latest crisis, meaning that despite Hillary Clinton’s words of assurance for Americans and the world, the banks remain “too big”. So, how can she prevent something from happening when it has already happened?

The Glass-Steagall Act was repealed because it was perceived as counter-productive. In other words, the act curbed banks’ access to more money. As banks help fund American politics, academia and much of the media, there’s a big conflict of interest preventing serious, unbiased scrutiny of the problem.

Beyond all the anti-bank rhetoric of American politicians – particularly Hillary Clinton – simple questions emerge. What do American politicians really care about? 

You bail out the banks, using massive amounts of taxpayers’ money to save them and public deposits, thereby wasting “honest money” in cleaning up after negligence and corruption. Or you let banks fail, meaning depositors suffer and “honest money” is wronged again. Depositors (“honest money”), however, won’t be victimised if you opt to revive the Glass-Steagall Act. This leads to the key question American politicians must address: What is our best option?

One argument is that the pre-2008 mistakes can’t be repeated, but that is to underestimate the disastrous potential of uncontrolled capitalism, which thrives in an atmosphere of imprudence, murkiness and lack of principles. Most of all, feral capitalism thrives where memories are short. Some laws are like life-buoys: it makes no sense to argue that they aren’t necessary because accidents are unlikely to happen. After all, the evidence is that no ship is unsinkable.

Hillary Clinton seems to have pinned her hopes on minor laws and personal principles rather than the one measure that can really help. The least she should do is take a hard look at the history of both the United States and the world, which has proved time and again that where banks are concerned, ethics and lacklustre laws are no defence against the raging seas of capitalism.