In the last two days, we’ve seen the faltering Democratic party front runner decide that it might behoove her to distance herself from the Trans-Pacific Partnership, the centerpiece of her “pivot to Asia” strategy, and America’s most hated oligarchs, big banksters. Might the timing of this sudden change of heart have a wee bit to do with the Presidential debates next week, and it not being all that easy to defend the pet causes of the privileged classes in crowd-pleasing soundbites when challenged by Sanders?
As least Greek prime minister Alex Tsipras, who engaged in similar reversals, can at least be credited with fighting hard for what he’d promised Greeks, even if those promises were contradictory, and then retreating only in the face of overwhelming force, namely, having the ECB put a choke hold on the Greek banking system.
By contrast, Hillary’s sudden shift is simply a not-terribly-well-executed attempt to reposition herself. As Jeb Lund described her increasingly obvious problem in Rolling Stone:
In the last day, Hillary Clinton announced her opposition to the Trans-Pacific Partnership, a deal that she will likely claim she only championed as part of her duties as secretary of state and that, in reality, she just as likely helped to create. She probably opposes it as strongly as she did NAFTA, which her husband created, and which she and Barack Obama campaigned against in 2008 and then proceeded to do nothing about. This is a habit. She probably is doing this because, in spite of a career in which neoliberalism got her this far, Bernie Sanders is starting to eat her lunch among labor voters, progressives and anyone who is not a big-money donor. You know, the people who vastly outnumber the latter and do things en masse, like vote.
On the TPP, Clinton’s shift in position, while not exactly credible, also amounts to less than she’d like the great unwashed bottom 90% to believe. As Lambert and others have pointed out, the press did her a huge favor via headlines that considerably overstated her distaste for the “trade” agreement. It falls short of opposition; it’s of the form, “Based on what I know now, I don’t like it.” That gives her plenty of leeway to claim she’s gotten more comfortable as she has learned more or contend that she’s won concession (say improved side deals) that allow her to support the pact.
But even if Clinton actually does oppose the deal, the cost to her in donor funds is not likely to be high, so she might stick with this position to bolster her progressive bona fides. Beltway insiders tell me that despite all the weight Obama threw behind getting an agreement done, corporate support was narrow. The TPP’s and its ugly sister, the TTIP’s seemingly natural base, multinationals, were not pushing for it because trade is already substantially liberalized. They didn’t esee much to be gained.
And of the industries that were keen about the deal, such as Hollywood, tech, Big Pharma and Big Ag, enthusiasm has also cooled due to the concessions made in the Atlanta round, particularly on the agriculture and drug fronts. Plus with the House leadership now in disarray, the Republican rebels who oppose to the deal are ascendant. So Clinton is not spending anywhere near as much in the way of big donor chips as one might think if she continues to express antipathy for the TPP.
On the banking front, even though Clinton has just served up a not-too-bad menu of bank reforms, it’s inconceivable to see her as doing more than head-fakery. The Clintons have ridden to success on the back of the fundraising of the powerful Robert Rubin faction in the Democratic party. And Obama, who has been similarly dependent on Big Finance as donors, has also made crowd-pleasing gestures to go after the banksters and never followed through in any serious way. Remember how the Administration kept talking up its plans to close the carried interest loophole in 2011 and 2013? Yet Obama held big fundraisers in New York City and the homes of private equity barons whose lucre had come from that ruse. It’s hardly surprising that Obama was somehow never able to secure anything more than optical tax increases on the rich.
Similarly, even though Obama did pass Dodd Frank, it was weak tea to begin with and designed to be watered down, with numerous reforms kicked down the road to be finalized after various studies were completed. That gave lobbyists a second go at getting their language in the final rules, out of the sight of the press, and well after the public fury over the bailouts had cooled to sullen resignation. It’s hard to think that lesson was lost on Hillary.
Now if you were naive enough to believe that Clinton had had a Damascene conversion and really wanted to rein in the big banks, her plan does have some promising elements. But even so, remember what her stated objectives are: to prevent future crises. Yet surprisingly large cohort of economists, including the IMF, are calling for more radical action. They’ve has come to the conclusion that the financial services industry is outsized and has become a drag on growth.
Clinton would charge a yearly “risk fee” on a sliding scale on the liabilities of banks with more than $50 billion in assets along with other institutions overseen by financial regulators…
“These sound like much more meaningful reforms than some of the things she has suggested earlier,” said former Federal Deposit Insurance Corp Chair Sheila Bair, currently president of Washington College, in Chestertown, Maryland.
Clinton’s HFT tax would target securities transactions with excessive levels of order cancellations, which her campaign said unnecessarily burdens markets and enables unfair and abusive trading strategies…
Clinton would also pursue additional oversight of the “shadow-banking” sector by imposing other margin and collateral requirements on risky short-term borrowing; review recent regulatory changes to the money market fund industry for possible holes; create new reporting requirements for hedge funds and private equity firms; and strengthen the authority of the Financial Stability Oversight Council.
The HFT changes seem well thought out and no doubt reflect the input of former CFTC chairman Gary Gensler, who is one of her key advisors. But some of her other ideas, like “give the regulators more authority to force the breakup of big dangerous banks” are pie in the sky.
Even if she were to get a provision like that passed, the opposition to forcing an institution that was anything but on the verge of failure would be overwhelming. The ideology in America is to leave businesses to run themselves, which includes running themselves into the ground, even when those businesses are banks that are so heavily subsidized as to not be properly regarded as private enterprises. Just read Sheila Bair’s memoir, Bull by the Horns, in which she described how she was completely stymied in her efforts to get information about the condition of the non-FDIC regulated parts of Citigroup, in an successful effort to block her from putting it in resolution in 2008 and forcing out its clearly inadequate CEO, Vikram Pandit (as in she would be depicted as shooting from the hip, over the opposition of regulators who had better information. Let us not forget that those regulators, above all Treasury Secretary Timothy Geithner, had very close ties to Citigroup vice chairman Bob Rubin). Despite the pitched battle against her, she did succeed over time in getting Citi to downsize considerably.
It is important to see Clinton push for much stronger efforts to cut the shadow banking system down to size. The role should not be to prevent it, which is unrealistic, but to keep it from becoming so large or sufficiently connected to the big banks and major capital markets players that it poses a threat to the financial system. But I’m not sure that going after the repo system is sufficient. One of the big vectors remains over the counter derivatives. Admittedly, many of those risks arise precisely due to the fact that those positions are typically funded in short-term markets. But I’d like to see more of a belt-and-supsenders approach, since the lucrative OTC derivatives are not socially valuable and are in many cases detrimental (as in their are used for accounting, regulatory, and tax gaming).
The New York Times’ Neil Irwin similarly sees Clinton’s reform plans as limited in ambition:
Directionally, Mrs. Clinton favors more intensive regulation of Wall Street than what is in place now. Bank executives and lobbyists will find little to like in her plan. But her approach stops short of the wholesale breakup of too-big-to-fail banks favored by Mr. Sanders and Mrs. Warren. She would prefer instead to take the philosophical approach embodied in the 2010 Dodd-Frank financial reform act a few steps further.
And this part illustrates the limits of her approach:
Mrs. Clinton calls for new international rules governing disclosure, margin and collateral requirements to try to make a failure of one global bank or insurer less likely to endanger the entire world economy. These are changes that are likely to take place through regulatory action rather than legislation.
“International rules” take an eternity to get done, even when the key actors can reach agreement. I’d like to see a more bloody-minded approach, given that the US can deny access to dollar based payment and clearing systems to people who don’t want to play by our rules.
The big problem with Hillary is it is hard to believe she stands for anything other than her desire to exercise power. How can you square her position on the issue she appears to care most about, women’s rights, with her warmongering? Economic progress is almost always a necessary but not sufficient condition for women to get more education, more access to jobs, and most important, more reproductive control. Men who feel their social and economic status is precarious are not going to accept increased competition from women in society and in the workplace. Wars devastate economies, lead to flight of the upper classes and educated professionals, and often produce a rise in rape and other types of violence against women. Yet she seems utterly blind to the hypocrisy of her claims of trying to advance the position of women abroad while being a rabid hawk.
Despite his famed kolotoumbas (somersaults) and the disaster his leadership has represented for Greece, by delivering Greece’s creditors a more complete victory than they could ever have engineered on their own, Tsipras still remains in power. Why? First, even with his horrific errors of judgment, he is still seen as well intentioned. Second, Greece is fabulously corrupt. While Syriza is not clean, Tsipras and Syriza are not (much) in the pocket of the oligarchs, and thus are less tainted than the establishment parties. Third, by al accounts, Tsipras is a charismatic and inspired speaker.
None of the factors that inclined Greek voters to forgive Tsipras for his flip-flops are operative with Clinton. Voters doubt Clinton’s character the more they see of her, as her rising disapproval ratings show. The Clintons can never hope to distance themselves from their lust for money and connections to the rich and powerful. And Hillary has all the pizzaz of a corporate attorney.
Tsipras’ leadership has been a tragedy for Greece, and his becoming a Vichy Left prime minister is also personal tragedy, since history is not likely to judge him kindly. Even the word “kolotoumba” so often applied to his reversals, has the connotation of “falling on your ass.”
By contrast, it’s hard to see Hillary as anything other than a farce. American voters are figuring that out and it’s unlikely her feints this week will do much to change that.