Gallup polled young Americans about whether they prefer Donald Trump or Hillary Clinton on a range of issues, and Trump holds the advantage on just one: “government regulation of Wall Street and banks,” where he’s ahead by 7 points.
Trump’s edge here is probably a legacy of the Democratic primary, where Clinton was repeatedly assailed by Bernie Sanders as relatively soft on Wall Street and where her paid speaking appearances for Goldman Sachs were a prominent issue. A recent New York Times story by Nicholas Confessore and Susanne Craig explored the broader context of Clinton’s relationship with Goldman, which dates back to her years as a senator from New York (it’s common for senators to be allies of home-state industries) and extends into her time as secretary of state.
But while the groundwork for some personal doubts about Clinton’s connections to the financial services industry are certainly there, Trump is hardly a clean hands candidate himself. On the contrary, he owes at least $250 million to various banks and has a particularly close financial relationship with scandal-plagued Deutsche Bank.
Because Trump hasn’t released tax returns or done other extensive financial disclosures, we don’t know exactly who his business partners are in all his ventures or whom he owes money to. But nothing happens in the real estate industry without loans, and loans mean banks.
Beyond that, there’s the old-fashioned matter of policy proposals. Clinton’s platform calls for a range of steps to make Obama-era bank regulation more stringent, while Trump is proposing to eliminate all new regulations adopted since the financial crisis.
Many people may agree with Trump that the Obama administration has been far too tough on Wall Street; this is also the position of Paul Ryan, Mitch McConnell, and congressional Republicans more broadly. But to the extent that young Americans embrace Clinton’s center-left views on other issues, it seems likely they are simply making a mistake about who stands where on bank regulation.
Clinton’s plan for bank regulation: get tougher
Clinton and Trump differ first and foremost on the basic legitimacy of the Dodd-Frank financial regulation overhaul that President Obama signed into law years ago.
Clinton says she supports the law and will fight Republican efforts to defund or repeal it.
She also wants to go beyond the existing Dodd-Frank framework in various ways. She has a proposal to close a few loopholes in the so-called Volcker Rule that is supposed to prevent banks from doing speculative trading with FDIC-insured money. She wants to provide more funding to two key market regulatory agencies, the CFTC and the SEC, so they can do more enforcement. And she wants to reduce bank debt with risk fees and higher capital requirements.
Clinton differs from the left wing of the Democratic Party in that she fundamentally embraces the legitimacy of big financial services conglomerates as a form of business in a way that Sanders and Elizabeth Warren do not. But she views underregulation of banks as a risk to the country’s economic health and prosperity, and it’s not a coincidence that Warren and Sanders have endorsed her election.
Trump’s plan: tax cuts and less regulation
Trump, by contrast, has promised to make “dismantling” Dodd-Frank the cornerstone of his regulatory approach. He’s also promised a short-term halt on all new rule writing by financial regulatory agencies once he’s in office, “so our businesses can reinvest in the economy.”
Trump also might be offering an enormous tax cut to hedge fund and private equity managers by allowing what’s known as “pass-through” income to be taxed at a low rate of 15 percent.
His campaign is definitely proposing a big cut in the corporate income tax rate — down to 15 percent. His campaign is also definitely proposing a big cut in the top individual income tax rate, down to 25 percent for labor income and 20 percent for capital gains and dividends.
Depending on whom he is talking to, however, Trump sometimes says that business income amassed by limited liability partnerships will also be taxed at the 15 percent rate. There is about $1 trillion worth of difference between the two versions of Trump’s plan, and he hasn’t really bothered to clear it up.
The main appeal of giving LLPs a very low tax rate to Trump is probably that real estate deals are frequently structured in this way, so Trump would be delivering an enormous income tax cut to himself. But hedge funds and private equity funds are also normally structured this way, so many Wall Street types would enjoy it too.
On finance, Trump is a very normal Republican
Donald Trump is an unusual figure in any number of ways, from his Twitter feuds to his views on several issues. He breaks clearly with GOP orthodoxy on trade and foreign policy, while seeming somewhat more open to LGBTQ rights and even a few forms of gun regulation.
His views on finance, however, are perfectly orthodox Republican Party doctrine.
Dismantling Dodd-Frank is straight out of the Paul Ryan policy blueprint for House Republicans; it’s also the approach endorsed by Senate Banking Committee Chair Richard Shelby and Majority Leader Mitch McConnell. More broadly, this was a point of absolute common ground between Trump and his GOP primary rivals, with everyone from Ted Cruz to Jeb Bush to John Kasich agreeing that a rollback of new post-crisis rules is the correct path forward.
For all Trump’s oddities, there are perfectly good reasons why he has the endorsement of the overwhelming majority of Republican Party elected officials around the country. Bank regulation — where he has an orthodox conservative viewpoint and where Clinton wants tougher rules — is one of those reasons.