By Kevin Cirilli - 05/12/15 06:00 AM EDT
Wall Street is worried that Sen. Bernie SandersBernie SandersSanders: I don't hate Clinton Trump: Hillary probably 'demanded' Lynch meeting Sanders skirts Biden's claim that he'll endorse Clinton MORE’s vigorous calls for banking industry reform will pull Hillary ClintonHillary Rodham ClintonA summer surprise: the case for CTE reform Sanders: I don't hate Clinton Trump: Hillary probably 'demanded' Lynch meeting MORE to the left, as the two presidential candidates battle for the 2016 Democratic nomination.
Sanders (I-Vt.) last week unveiled new legislation designed to break up the nation’s largest banks, declaring that “if an institution is too big to fail, it is too big to exist.”
Though it stands virtually no chance of passage in the GOP-controlled Congress, the bill has industry leaders fretting.
“But we care about whether this impacts Hillary and whether she’ll try to pander to the far left.”
Business and banking groups, and their lobbying forces on K Street, are quickly lining up against the legislation.
“Misses the mark,” said Tom Quaadman, vice president of the U.S. Chamber Center for Capital Markets Competitiveness.
“I fully expect Senator Sanders’s third attempt to break up banks to have the same impact as the previous two: zero,” echoed Tony Fratto, a partner at Hamilton Place Strategies, which does communications work with big banks.
Despite the vocal opposition from the business community, Sanders’s ability to activate progressive outside groups could mean he may be able to move Clinton to the left — even if, as conventional wisdom says, he poses no real threat to the former secretary of State’s eventual nomination.
Sanders’s rhetoric signals that, seven years after the 2008 economic collapse, progressives still see tapping into anger about the taxpayer bailouts to big banks as a winning political strategy.
“When it comes down to it — he’s doing this not just because he’s trying to demonize the industry but this populist stuff is popular with his base,” a second banking lobbyist said.
Groups like MoveOn.org and Democracy for America (DFA) have already launched campaigns to get Clinton to adopt a more progressive platform and to draft Sen. Elizabeth WarrenElizabeth WarrenOvernight Finance: Senate sends Puerto Rico bill to Obama | Treasury, lawmakers to meet on tax rules | Obama hits Trump on NAFTA | Fed approves most banks' capital plans The Trail 2016: When a pivot isn’t always a pivot Overnight Tech: Facebook's changes worry publishers | First stage of spectrum auction ends | Clinton recruits from Silicon Valley MORE (D-Mass.) into the race, despite her declarations that she’s not running for president.
Rep. Brad Sherman (D-Calif.), who is sponsoring similar legislation in the House, said that any criticism of the legislation is coming from “top executives who control the biggest banks.”
“This isn’t about an election cycle,” Sherman said. “I am much more interested in what Hillary Clinton does as president in office than in a campaign. Campaigns are fun but governing is what matters.”
Still, Sherman said that he hopes the legislation, which even he conceded isn’t likely to become law this Congress, might move the needle for his party.
“I’m hoping that some time in the next few years we will have ‘too big to fail is too big to exist’ policy either by using existing laws or by passing new statutes,” Sherman said.
Paul Merski, an executive vice president at the Independent Community Bankers Association, said many smaller community banks support Sanders’s effort.
“It may force [Clinton] to speak about ‘too big to fail,’ ” Merski said.
Clinton is under pressure from Sanders, Warren and other liberals to take a harder line on financial issues as she looks to rally Democrats behind her campaign. But at the same time, too forceful a stance could cause her a headache in the general election.
In other areas — such as immigration, gay marriage and campaign finance —Clinton has taken liberal positions on issues since launching her campaign.
But she has yet to release any specific type of economic policy agenda, something that she is certain to be asked about in the coming months.
Meanwhile, Warren, Sanders and other progressives have raised criticism about former President Bill ClintonBill ClintonTrump: Hillary probably 'demanded' Lynch meeting America isn't afraid of the NRA, and Congress shouldn't be, either Report: Lynch will accept FBI recommendation on Clinton email case MORE’s economic policies during the late 1990s. Chief among them is his support for — and signature on — the repeal in 1999 of the Glass-Steagall banking law requiring commercial banks to split their investment banking operations.
Sanders was one of eight lawmakers to vote against Glass-Steagall’s repeal.
“Bernie Sanders is a long-time champion of these issues,” said Neil Sroka, spokesman for the DFA. “This is about Democrats putting forward very early on in the cycle big progressive ideas.”
Quaadman was less convinced.
“Continuing to politicize the debate about our financial regulatory system will not produce the thoughtful, forward-looking leadership and smart regulation we need to grow our economy,” Quaadman said.