How the Fight Over Wall Street Shows the Democratic Divide

When it comes to public policy, Vermont Senator Bernie Sanders and former Secretary of State Hillary Clinton both use shades of Democratic blue. But he paints with a broad brush, while she prefers a finer point.

At Thursday’s debate, those differences came out most clearly on the topic of Wall Street, which animates Sanders’ populist base.

“I want to say something, and it may sound harsh, not to you, but to the American people,” he said, repeating a well-worn phrase from the campaign trail. “In a sense, in my view, the business model of Wall Street is fraud. It’s fraud.”

That passion plays well to the cheap seats, helping propel Sanders from the political wilderness to a virtual tie in Iowa this week and a likely rout in New Hampshire next Tuesday. But it also leaves Sanders open to the attack that he’s naive — a revolutionary without a road map.

Sanders, for example, frequently calls for breaking up the big banks, but he doesn’t actually spell out what that would mean. How many banks would be broken up? Which ones? How would he overcome Republican and corporate resistance?

Sanders routinely calls for the reinstatement of Glass-Steagall, the late, lamented law that drew a bright line between commercial banks and their wilder investment-oriented brethren. But he says nothing about what to do with the thousands of powerful, non-bank entities, like the hedge funds, mutual funds, private-equity funds and massive insurance firms, including former AIG, all of which have multiplied like bunnies in the financial district in the past 10 years, and none of which would be affected by a reinstated Glass-Steagall.

It’s here where Clinton is strongest on the policy but weakest on the politics. Ever the wonk, the former New York Senator doesn’t cotton to Sanders’ barn-burning, instead embracing a finer-tuned technocratic approach. Like Sanders, she wants to rein in Wall Street, she says, but she wants to do it in a more subtle, studied way.

“I have great respect for Senator Sanders’ commitment to try to restore Glass-Steagall. But I do not believe that that is enough. And in fact, I don’t believe it really addresses a lot of the biggest issues we have,” she said at the debate.

The more pragmatic solution, she explained, would be to embrace President Obama’s 2010 Dodd-Frank Wall Street Reform Act, and then enforce and strengthen existing rules inside of that existing regulatory apparatus.

“You know, we now have power under the Dodd-Frank legislation to break up banks. And I’ve said I will use that power if they pose a systemic risk. But I want to go further, because it was investment banks, it was insurance companies, it was mortgage companies, all of which contributed,” she said.

She then pointed voters to her dense, nearly 5,000-word proposal, which is complete with footnotes and studded with such scintillating sentences as “Ensure that DPAs and NPAs impose fines that are significant enough to deter illegal activity, so that firms do not have an incentive to break the law.” To the ramparts!

Clinton’s ever-staid pragmatism plays well with moderates as well as many liberal Republicans who find themselves alienated by both GOP front runners. But, just as Sanders’ broad strokes is both a strength and weakness, Clinton’s attention to detail leaves her wide open to Sanders’ criticism that she is too easy on Wall Street.

And therein lies the fundamental difference between the two Democratic candidates. Sanders would to tear down the broken institutions of American governance and try to build them anew, while Clinton would burrow into the hulking, creaking machine and pull the levers from within.

In short, Sanders calls for revolution; Clinton, for evolution.