Gardner said investors may be underappreciating the risk that a form of Glass-Steagall could be reinstated. "If Congress takes a serious look next year at regulatory relief for community banks and regional banks, then that is going to be an opportunity for the Elizabeth Warren wing of the Democratic Party to step in and pass some form of Glass-Steagall," said Gardner, who is director of Washington research at KBW.
But he also noted that party platforms are not binding and are many times ignored by candidates.
The Republican Party surprised many last week when it included a potential return to Glass-Steagall in its platform — traditionally not a GOP position.
GOP platform: "We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment. Sensible regulations can be compatible with a vibrant economy. They can prevent the strong from exploiting the weak. Right now, the regulators are exploiting everyone. We are determined to make regulations minimally intrusive, confined to their legal mandate, and respectful toward the creation of new and small businesses."
But Gardner said that may have been more an effort to appeal to followers of Sen. Bernie Sanders, who wants to break up the big banks.
"While some will dismiss that effort and … while there's not much of an appetite for that in Congress, the warning, the cautionary note I would offer is that if Congress is trying to pass the community bank regulatory relief bill and Elizabeth Warren and her allies are blocking the bill and if Republicans think it's a good bill for community banks, the reintroduction of Glass-Steagall might be the political price they'll have to pay," said Gardner. Warren's proposals go way beyond Glass-Steagall, he said.
Glass-Steagall was overturned after a bipartisan effort to remove it during the administration of President Bill Clinton. The end of the rule allowed for super-sized financial institutions that in theory were going to sell consumers a buffet of services for less and make the U.S. banking system more competitive on a global basis.
Then the financial crisis hit, and Congress adopted a new regulatory reform act, Dodd-Frank, which went into effect in 2010. That law also is in the cross hairs. GOP candidate Donald Trump would like get rid of Dodd-Frank, especially the Consumer Financial Protection Bureau.
Democrat Hillary Clinton wants to retain Dodd-Frank and the CFPB. "We will also vigorously implement, enforce, and build on President Obama's landmark Dodd-Frank financial reform law, and we will stop dead in its tracks every Republican effort to weaken it," the Democratic Party platform said.
But they also added a return to some form of Glass-Steagall.
The Democratic platform says: "Banks should not be able to gamble with taxpayers' deposits or pose an undue risk to Main Street. Democrats support a variety of ways to stop this from happening, including an updated and modernized version of Glass-Steagall as well as breaking up too-big-to-fail financial institutions that pose a systemic risk to the stability of our economy."
The Democrats also propose a financial transactions tax aimed at high-frequency trading.
Greg Valliere, chief strategist at Horizon Investment, said Clinton would seek to preserve Dodd-Frank. "I just don't think she's that comfortable with going back to Glass-Steagall," he said.