Hillary has a huge Wall Street problem. And it's Bill's fault.

(Image credit: REUTERS/Carlo Allegri)

last updated 29 June 2015

When a U.S. senator looks into the mirror, the joke goes, he or she sees a U.S. president looking back. But does that include even a scraggly-haired, septuagenarian socialist like Bernie Sanders?

Apparently the answer is yes. He's running for president, after all. And he can even take heart from a key poll that shows him statistically tied with Hillary Clinton in the first primary state of New Hampshire.

Now, most analysts have assumed the Vermont senator is running not to win, but to highlight issues important to him, especially income and wealth inequality. He's more Ralph Nader than Barack Obama. But if Sanders figures he can really make a race of it, then he'll have to go at Clinton as hard as he would any Republican. So far he hasn't. And maybe he won't. Sanders has long stressed his dislike of negative campaigning and nasty, 30-second TV ads. Then again, Sanders also says that elections should be about "serious debates over serious issues."

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

https://cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516.jpg

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

If Sanders wants to pose a legitimate challenge to Clinton's coronation, he must engage with her in a serious debate about the 2007-2009 recession and financial crisis. It would hardly be rehashing ancient history. The effects of the economy's near-collapse are still being felt today, as Clinton herself mentioned during her official presidential announcement speech:

We're still working our way back from a crisis that happened because time-tested values were replaced by false promises. Instead of an economy built by every American, for every American, we were told that if we let those at the top pay lower taxes and bend the rules, their success would trickle down to everyone else. What happened? Well, instead of a balanced budget with surpluses that could have eventually paid off our national debt, the Republicans twice cut taxes for the wealthiest, borrowed money from other countries to pay for two wars, and family incomes dropped. You know where we ended up. [Hillary Clinton]

That's just the opening Sanders needs. Clinton offers a nonsensical explanation for the crisis. Tax cuts? Inequality? Budget deficits? Those are nothing more than tired talking points. None of that stuff made it into the opinions of the bipartisan Financial Crisis Inquiry Commission, charged with investigating the root causes of the meltdown. Instead, the experts blamed the megabanks, credit raters, regulators, and government agencies. Weird that Clinton didn't mention those perps in her history lesson. After all, it's not like she is reluctant to critique Wall Street. As she said recently, "The top 25 hedge fund managers (are) making more than all of America's kindergarten teachers combined." And why wouldn't she mention financial deregulation, which the FCIC said "stripped away key safeguards, which could have helped avoid catastrophe." Aren't Democrats always dinging Republicans for obsessing over deregulation (at least when they are not obsessing over tax cuts)?

Maybe Clinton's aversion to discussing what many experts view as the real causes of the crisis is explained by her husband's key role in them. Indeed, Time magazine named Bill Clinton one of "25 people to blame for the financial crisis." The indictment:

President Clinton's tenure was characterized by economic prosperity and financial deregulation, which in many ways set the stage for the excesses of recent years. Among his biggest strokes of free-wheeling capitalism was the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act, a cornerstone of Depression-era regulation. He also signed the Commodity Futures Modernization Act, which exempted credit-default swaps from regulation. In 1995 Clinton loosened housing rules by rewriting the Community Reinvestment Act, which put added pressure on banks to lend in low-income neighborhoods. It is the subject of heated political and scholarly debate whether any of these moves are to blame for our troubles, but they certainly played a role in creating a permissive lending environment. [Time]

There is a reasonable case that the seeds — at least some of them — for the economic meltdown were sown during the Bill Clinton administration. This is all rather inconvenient for Hillary Clinton given that the public's fond memory of the 1990s boom is a big reason why she's the prohibitive favorite to be the 2016 Democratic nominee.

To critique Bill Clintonomics, then, is to undermine her own candidacy's core rationale. It might also irk Wall Street donors already miffed by her campaign's emphasis on what they make versus that of public servants. So she won't go there unless Sanders makes her by pointing out that (a) the Glass-Steagall repeal is still in effect, (b) the biggest banks are even bigger today, and (c) that's all just fine with her Big Money cronies.

Now that would make for a heck of a 30-second ad.

James Pethokoukis is the DeWitt Wallace Fellow at the American Enterprise Institute where he runs the AEIdeas blog. He has also written for The New York Times, National Review, Commentary, The Weekly Standard, and other places.