WASHINGTON -- Hillary Clinton's campaign still doesn't know what to do about Wall Street. Big financial firms, including Goldman Sachs, Morgan Stanley and UBS, have collectively paid her millions of dollars for speeches in recent years. She has rebuffed calls from Sen. Elizabeth Warren (D-Mass.) and Democratic presidential contender Sen. Bernie Sanders (I-Vt.) to break up the biggest banks, and awkwardly cited 9/11 during a debate to explain her campaign's popularity with financiers.
With Sanders set to make a major speech on financial policy in New York on Tuesday, however, the Clinton team is going on offense, insisting that her bank reform plan is tougher than that of her rival.
It isn't. But that didn't stop the Sanders campaign from shooting itself in the foot with a nasty, misleading attack on a top adviser to Clinton.
Clinton's financial policy platform has some solid elements, including a plan to crack down on economically pointless high-frequency trading, in which speculators reap big profits from tiny movements in stock prices with computers that execute thousands of hyper-fast transactions.
Sanders, however, has taken a much harder line, calling to break up big banks, and to force banks engaged in essential, traditional banking out of the risky business of securities trading. Clinton has generally responded to Sanders' plan with semantic gamesmanship. Breaking up entities called "banks," she has said, would have ignored problems at the massive insurance company AIG and the investment bank Lehman Brothers, both of which collapsed in 2008.
This is not true. In addition to their high-flying speculative operations, both AIG and Lehman operated traditional banking units that engaged in boring bank activities like accepting deposits and extending loans. Sanders' plan would have forced the companies to split up their activities.
Clinton's talking point isn't just technically false. It's also cheap. The phrase "big banks" is generally used by the public to mean "large financial institutions." Sanders' rhetoric against Wall Street has been relentless -- no one seriously believes that his call to break up "banks" would exclude massive insurance or investment houses, just because they happen to have a narrow regulatory charter.
And Wall Street, it turns out, is actually pretty psyched about Clinton's financial platform.
"We continue to believe Clinton would be one of the better candidates for financial firms, as she is pushing concrete reforms where one can understand the downside risk rather than more radical overhauls," Guggenheim Partners analyst Jaret Seiberg wrote in an October note to clients analyzing Clinton's plan.
Nevertheless, the Clinton campaign apparently thinks voters will believe that her plan is way tougher than Sanders' if she and her advisers just say it is. On Monday, the Clinton camp issued a statement from campaign CFO Gary Gensler arguing that Sanders was soft on Wall Street.
“Any plan to further reform our financial system must include strong provisions to tackle risks in the ‘shadow banking’ sector, which remains a critical source of potential instability in our economy," Gensler said. "This includes certain activities of hedge funds, investment banks like the now-defunct Lehman Brothers, and insurance companies like AIG. Unfortunately, Senator Sanders has so far taken a hands-off approach to some of the riskiest institutions and activities in our economy, which were among the biggest culprits during the 2008 crisis."
There's a reason why the Clinton campaign is deploying Gensler on this front. As chairman of the Commodities Futures Trading Commission, he was the toughest post-crisis bank regulator. On a host of key regulatory fights, he refused to buckle to either bank lobbyists or even finance-friendly members of the Obama administration.
The Sanders campaign didn't do itself any favors responding to Gensler..
"Sen. Sanders won’t be taking advice on how to regulate Wall Street from a former Goldman Sachs partner and a former Treasury Department official who helped Wall Street rig the system," Sanders spokesman Michael Briggs said in an emailed statement.
That's an unfair caricature of Gensler's public service. It's true that he once worked for Goldman, but his tenure at the CFTC is broadly lauded by financial reform advocates. Only Elizabeth Warren garners greater disdain from bank lobbyists.
But Gensler's statement on behalf of Clinton is nevertheless a work of political misdirection. Neither Clinton nor Gensler have called to break up big hedge funds, big private equity firms, or any other massive financial conglomerate involved in the shadow banking sector. Instead, they have ridiculed calls to break up big "banks" as insufficient, while peddling soft reforms for shadow banks. Many so-called banks are in fact deeply involved in shadow banking activities. The biggest banks continue to invest in risky hedge fund and private equity operations -- the core of the shadow banking sector. Breaking them up would limit those risks.
The ultimate significance of this dust-up depends largely on what Sanders will say in Manhattan on Tuesday.
Clinton continues to lead Sanders in national polls and in Iowa, which hosts the first statewide primary contest, while Sanders has the edge in New Hampshire, the second.
Zach Carter is a co-host of the HuffPost Politics podcast "So That Happened." Subscribe here, or listen to the latest episode below: