Noam Scheiber is a senior editor at The New Republic, where he writes about politics and Obama administration economic policy.
When JPMorgan announced its $2 billion trading loss a few weeks back, a handful of smart conservatives saw an opportunity for Romney to get to Obama's left: Call for an end to too-big-to-fail. As AEI's James Pethokoukis put it:
"In one fell swoop, Romney would undercut the charge that he's a creature of Wall Street and the financial superelite. And given how many hedge fund managers and other investment pros dislike the mega-banks, Romney probably wouldn't even take a fundraising hit. At the same time, he would outflank Obama on the financial reform issue by portraying Obama-Dodd-Frank as a sop to the big banks that failed to fix the problem."
I agree. This strikes me as a huge vulnerability for Obama given the residual hostility toward the banks, the increasingly-evident porousness of Dodd-Frank, and the likelihood of continued JP Morgan-style blowups as Europe aggravates the financial markets. So far, Obama's saving grace when it comes to Wall Street has been an opponent far more closely associated with the financial sector than he is. According to a poll in today's Washington Post, "By a 23-point margin, voters say it's Romney, not Obama, who would do more to advance the interests of Wall Street." But the poll shows that, even with this, Romney still has a real opportunity:
As for the new federal regulations for banks and other financial institutions put in place during the current administration, few voters — about one in four — say they have struck the right balance. About 25 percent of all voters say the regulations "go too far," while 39 percent say "not far enough." Most Democrats say the new rules are not sufficiently tough; among Republicans, twice as many say they are unnecessarily restrictive compared with those saying they are too lenient. Independents tilt in the "not far enough" direction [emphasis added].
And even this understates the upside to targeting overgrown banks. Surely a large portion of the Republicans who say Dodd-Frank is overly restrictive would favor breaking up big banks. See, for example, this recent statement from Republican-in-good-standing Jeb Hensarling:
The news of J.P. Morgan Chase's recent trading loss has raised the cry of 'I told you so' from proponents of the almost 2-year-old Dodd-Frank Act. They say the law's Volcker rule would have prevented such a loss and that without more regulation, financial institutions will continue to make poor investment decisions. ... Unfortunately, Dodd-Frank codifies TBTF into federal law. Since its passage, the big banks have become larger and the small banks have become fewer. As a nation, we would do well to rethink TBTF's fundamental premise before it's too late.
So why wouldn't Romney pull the trigger? Pethokoukis suspects Romney believes it's a genuinely bad idea, which may be the case. But, then, I'd guess Romney feels the same way about a trade war with China, and yet his rhetoric on that front is pretty provocative. I'd wager that Team Romney is reluctant to cede any portion of its fundraising advantage on Wall Street, which they see as a huge asset against Obama. While many money managers do disdain the megabanks, what they disdain even more is attacks on Wall Street for apparent political gain (one reason for their constant fulminating against Obama). And, of course, the big banks themselves wouldn't exactly be gratified. (On top of which, Romney is so closely associated with Wall Street that he risks alienating these backers without really changing public perceptions of himself.)
In the end, this strikes me as the kind of risk a rational candidate would take if he were the underdog, but not if he thought he was going to win. So perhaps the simplest explanation is that Romney increasingly likes his chances.