The party platform approved at the Republican National Convention in Cleveland offers official support for reinstating the Glass-Steagall law, which separates riskier securities trading from traditional commercial banking. The move would require busting up the six largest banks in America.
“We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment,” the platform reads.
The GOP platform language is an economic policy earthquake. Republicans have long opposed financial regulation in any form. The official support for Glass-Steagall reverses decades of Republican orthodoxy, and drives a wedge between progressive Democrats and Hillary Clinton. The presumptive nominee repeatedly rejected calls to reinstate Glass-Steagall during the primary season, ridiculing her challenger, Sen. Bernie Sanders (I-Vt.), for supporting the policy. The Clinton campaign’s Wall Street reform agenda makes more modest changes to the 2010 Dodd-Frank law, and was greeted warmly by the financial establishment.
Progressive icon Sen. Elizabeth Warren (D-Mass.) has authored legislation to reinstate Glass-Steagall. Warren has been mentioned repeatedly as a potential vice presidential partner for Hillary Clinton, but recent rumors suggest that Clinton is closer to naming Sen. Tim Kaine (D-Va.), despite a flat, uninspiring trial rally last week. Warren is the most popular figure in the party outside of President Barack Obama and the two primary rivals, Clinton and Sanders.
The Depression-era Glass-Steagall law prevented banks from using taxpayer-backed funds to fuel risky activities in the securities market. Glass-Steagall advocates argue that reimplementing the law would protect taxpayers from losses associated with risky trades, while also increasing the costs of such trades for hedge funds and private equity firms that do not benefit from public subsidies.
Despite the GOP support for the regulation, the policy details of party platforms often do not matter. There are no formal consequences for any president who fails to live up to the terms of the party platform, and fulfilling every plank is effectively impossible in modern politics.
But with his latest Glass-Steagall gambit, presumptive GOP nominee Donald Trump is trying to wrest the populist bank reform mantle away from the Democratic Party, after years of Republican support for big banks.
The official Democratic Party platform is expected to differ substantially from the policy pronouncements Clinton issued during the primary. Party leaders and activists negotiated a Democratic platform that embraces Glass-Steagall, even after Clinton herself rejected the idea.
Trump’s support for Glass-Steagall is not only a finger in the eye for Democratic financial reform advocates ― it also scrambles Republican politics. Re-implementing Glass-Stegall would be a radical change that Republicans in Congress have opposed for decades. And the GOP donor class ― which includes a large financier constituency ― is not enamored with resurrecting Glass-Steagall, even if supporting it would make things harder for Democrats.
GOP members of Congress have also been working to repeal Dodd-Frank ever since it was passed. That orthodoxy is maintained in the platform.
“The Dodd-Frank law, the Democrats’ legislative Godzilla, is crushing small and community banks and other lenders,” the document reads.