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DNC Targets Wall Street: Will a Clinton Presidency Hurt These Banking Stocks?
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Monday marked the opening night of the Democratic National Convention, and the party decided to highlight its progressive wing with favorites like Cory Booker, Elizabeth Warren, Michelle Obama, and Bernie Sanders addressing the crowd in Philadelphia.
Throughout the night, a few themes emerged. Cory Booker, the first African-American senator elected from New Jersey, spoke about unity and togetherness. Michelle Obama reflected on her time as first lady and her trust for Hillary Clinton. The idea of a $15 minimum wage was brought up multiple times throughout the night.
When Warren and Sanders took the stage, both in prime-time spots, it became clear that the Democrats were officially putting Wall Street in their sights, as both senators called for the breaking up of big banks.
“We don’t need weaker rules on Wall Street. We need stronger rules, and when big banks get too risky, break them up. Hillary will fight to keep big banks accountable,” said Senator Elizabeth Warren.
Sanders continued in the same vein:
“I am happy to tell you that at the Democratic Platform Committee, there was a significant coming together… the Democratic Party now calls for breaking up the major financial institutions on Wall Street and the passage of a 21st-century Glass-Steagall Act,” Senator Sanders proclaimed.
With Sanders and the Party saying that new Glass-Steagall is an important goal, the Democrats have now made their position on Wall Street clear… and in agreement with Donald Trump, who also (surprisingly I might add) added the reinstatement of Glass-Steagall to his platform last week.
What a New Glass-Steagall Will Do
The Glass-Steagall act came as a result of the 1929 stock market crash, and its main purpose was to separate investment and commercial banking activities. In the wake of the crash, many people blamed the reckless behavior of commercial banks and their involvement in stock market investment for the collapse of the market.
Glass-Steagall was repealed in 1999 under the Bill Clinton administration, and its repeal allowed banks to, once again, explode in size. The line between investment and commercial banking was blurred and Wall Street became home to several banking giants. For example, when JPMorgan merged with Chase Manhattan in September of 2000, its market cap was roughly $156 billion. Today, the company is valued at over $232 billion.
In the aftermath of the 2008 crash, people once again pointed the finger at the risky behavior of these massive firms. While it’s unclear exactly what would be included in a “21st century Glass-Steagall,” one can assume it would at least include new separations between commercial and investment activities, as well as tighter regulations throughout the industry. Overall, this platform seems to call for keeping these banks smaller.
Of course, this isn’t great news for the top five biggest banks in the country. JPMorgan Chase & Co. (JPM - Free Report) , Bank of America Corp. (BAC - Free Report) , Citigroup Inc. (C - Free Report) , Wells Fargo (WFC - Free Report) , and U.S. Bancorp (USB - Free Report) might stand to be dismantled under a Clinton presidency and Democratic-controlled Congress.
Investment firms like Goldman Sachs (GS - Free Report) , Morgan Stanley (MS - Free Report) , Credit Suisse , and Barclays Capital (BCS - Free Report) would also almost certainly be facing much stricter regulations, which could put a serious damper on their business.
This would be further bad news for a sector that’s already struggling right now. The Banks-Major Regional and Financial-Investment Banks industries are currently in the bottom 15% and bottom 10% of the Zacks Industry Rank, respectively.
Bottom Line
Last week, it was interesting that Donald Trump adopted the reinstatement of Glass-Steagall into his platform, and now the Democrats have joined him with their resounding endorsement of Wall Street regulation at the DNC.
Whether or not Hillary Clinton, whose campaign has seen the most financial support from Wall Street banks, will double-down on this rhetoric remains to be seen. Clinton will address the DNC crowd on Thursday.
For now, it’s beginning to look like Americans are fed up with big banks, and both parties are looking for major change in the industry.
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DNC Targets Wall Street: Will a Clinton Presidency Hurt These Banking Stocks?
Monday marked the opening night of the Democratic National Convention, and the party decided to highlight its progressive wing with favorites like Cory Booker, Elizabeth Warren, Michelle Obama, and Bernie Sanders addressing the crowd in Philadelphia.
Throughout the night, a few themes emerged. Cory Booker, the first African-American senator elected from New Jersey, spoke about unity and togetherness. Michelle Obama reflected on her time as first lady and her trust for Hillary Clinton. The idea of a $15 minimum wage was brought up multiple times throughout the night.
When Warren and Sanders took the stage, both in prime-time spots, it became clear that the Democrats were officially putting Wall Street in their sights, as both senators called for the breaking up of big banks.
“We don’t need weaker rules on Wall Street. We need stronger rules, and when big banks get too risky, break them up. Hillary will fight to keep big banks accountable,” said Senator Elizabeth Warren.
Sanders continued in the same vein:
“I am happy to tell you that at the Democratic Platform Committee, there was a significant coming together… the Democratic Party now calls for breaking up the major financial institutions on Wall Street and the passage of a 21st-century Glass-Steagall Act,” Senator Sanders proclaimed.
With Sanders and the Party saying that new Glass-Steagall is an important goal, the Democrats have now made their position on Wall Street clear… and in agreement with Donald Trump, who also (surprisingly I might add) added the reinstatement of Glass-Steagall to his platform last week.
What a New Glass-Steagall Will Do
The Glass-Steagall act came as a result of the 1929 stock market crash, and its main purpose was to separate investment and commercial banking activities. In the wake of the crash, many people blamed the reckless behavior of commercial banks and their involvement in stock market investment for the collapse of the market.
Glass-Steagall was repealed in 1999 under the Bill Clinton administration, and its repeal allowed banks to, once again, explode in size. The line between investment and commercial banking was blurred and Wall Street became home to several banking giants. For example, when JPMorgan merged with Chase Manhattan in September of 2000, its market cap was roughly $156 billion. Today, the company is valued at over $232 billion.
In the aftermath of the 2008 crash, people once again pointed the finger at the risky behavior of these massive firms. While it’s unclear exactly what would be included in a “21st century Glass-Steagall,” one can assume it would at least include new separations between commercial and investment activities, as well as tighter regulations throughout the industry. Overall, this platform seems to call for keeping these banks smaller.
Of course, this isn’t great news for the top five biggest banks in the country. JPMorgan Chase & Co. (JPM - Free Report) , Bank of America Corp. (BAC - Free Report) , Citigroup Inc. (C - Free Report) , Wells Fargo (WFC - Free Report) , and U.S. Bancorp (USB - Free Report) might stand to be dismantled under a Clinton presidency and Democratic-controlled Congress.
Investment firms like Goldman Sachs (GS - Free Report) , Morgan Stanley (MS - Free Report) , Credit Suisse , and Barclays Capital (BCS - Free Report) would also almost certainly be facing much stricter regulations, which could put a serious damper on their business.
This would be further bad news for a sector that’s already struggling right now. The Banks-Major Regional and Financial-Investment Banks industries are currently in the bottom 15% and bottom 10% of the Zacks Industry Rank, respectively.
Bottom Line
Last week, it was interesting that Donald Trump adopted the reinstatement of Glass-Steagall into his platform, and now the Democrats have joined him with their resounding endorsement of Wall Street regulation at the DNC.
Whether or not Hillary Clinton, whose campaign has seen the most financial support from Wall Street banks, will double-down on this rhetoric remains to be seen. Clinton will address the DNC crowd on Thursday.
For now, it’s beginning to look like Americans are fed up with big banks, and both parties are looking for major change in the industry.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>