On banking, Donald Trump shows his liberal stripes again

Break up big banks?

Donald Trump's conservative credentials have been questioned pretty much from the day he entered the presidential race, and now there's another reason to wonder about his political compass.

The platform on which the Republican standard-bearer will run is expected to call for the return of the famed Glass-Steagall law, a Depression-era measure that prevented the commingling of investment and commercial banking. Its repeal in 1999 is widely cited as a catalyst for the financial crisis that took down Wall Street and sent the country into the Great Recession.

For a supposedly pro-business GOPer to take a stand that attacks the country's financial center is remarkable. That it puts Trump to the left of Hillary Clinton is stunning.

Or not.

In reality, Trump has built his campaign on being a maverick, and not the John McCain cranky-but-conventional kind. Instead, his appeal has been on the very way he has repeatedly and brazenly thumbed his nose at the Republican establishment.

Whether that makes him a liberal as well as a maverick seems not to matter. What does matter is that it makes him, well, Trump.

"What Trump has done has been to connect with American voters by asking them to ignore the standard Republican playbook where you have to check off 57 different boxes of right-wing principles, where you communicate fidelity to principle, but you're indifferent to people," said Frank Buckley, a law professor at George Mason University who is in Cleveland for this week's Republican convention, where Trump will be declared the official nominee.

Presumptive Republican presidential nominee Donald Trump introduces his wife Melania on the first day of the Republican National Convention on July 18, 2016 at the Quicken Loans Arena in Cleveland, Ohio.
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His stance on Wall Street banks certainly isn't the only place where Trump has positioned himself as more progressive than the ostensibly uber-progressive Hillary Clinton. His stances on trade and spending place him firmly to the left of traditional Republican positions and Clinton herself. His eschewing of big-pocketed donors during his largely self-funded campaign also puts him in a unique position for a Republican — able to legitimately criticize a Democratic opponent for being potentially beholden to special interests.

The case of Glass-Steagall is particularly interesting, though.

After all, it's always been a tenuous argument that the repeal, signed by Hillary Clinton's husband Bill during his presidency, caused the financial crisis. Three of the crisis's biggest villains — investment banks Bear Stearns and Lehman Brothers, along with insurance giant American International Group — would not have come under the act's auspices. In fact, of the firms that truly needed a bailout, only Citigroup had direct relevance to Glass-Steagall.

Still, it's become a sticking point in the post-crisis debate, and Trump's willingness to bring it back on the books — however unlikely its approval is from a Congressional standpoint — represents a sharp poke in the eye to Wall Street. If the measure is approved, it would require the Street's largest institutions to disband. It's little wonder, then, why the finance world poured $35 million into Clinton's campaign coffers.

"The Clinton campaign has refused to support the reinstatement of the Glass-Steagall Act, even though the Democratic party platform is supportive of doing so," analysts Isaac Boltansky and Alison Ashburn at Compass Point Research and Trading said in a note to clients.

"We view the GOP call for reintroducing the Glass-Steagall Act as part of a broader political gambit intended to position the Trump campaign to the left of Clinton on financial services issues in order to promote a narrative that she is cozy with Wall Street and possibly even entice some Sanders supporters," they added.

There actually is a bill pending in the Senate to reinstitute the act. However, it has only one Republican sponsor, which is kind of the beauty for Trump: He gets to sound like a populist without having to face any real-world consequences. In turn, he forces Clinton to adopt a position that will be detrimental to her largest donors.

"Trump's actions will likely force Clinton to compensate by reiterating and expanding her calls for increased scrutiny of the shadow banking system, which could pose additional headline risk for asset managers, global insurers, and non-bank lenders," the Compass Point analysts said.

Meanwhile back in Cleveland, Trump's supporters aren't keeping a scorecard showing on which side of the political divide he falls. (It's especially interesting to note that Trump both supports the repeal of the Dodd-Frank reforms, and also wants Glass-Steagall back on the books. The two positions appear directly contradictory.)

If some of his positions seem to veer to the left, that's just fine so long as he is giving voice to all the disaffected voters who have heard his call.

Buckley, the George Mason professor, said many of those at the convention deem the current Wall Street regulatory climate and the bailouts of eight years ago as "consumer protection for billionaires" and wouldn't mind if Trump turns up the heat.

"Trump has demonstrated in an economy where the gains aren't shared uniformly across the populace, just talking about growth isn't going to do it," he said. "What he's really trying to do is to connect with ordinary Americans who have not been won over by a whole bunch of orthodox right-wing principles."