The message from Republican candidates in the fourth GOP presidential nomination debate Tuesday evening was clear: Breaking up too-big-to-fail banks isn't an option.
"We should raise the capital requirements so that banks aren't too-big-to-fail. If we are serious about it we would raise the capital requirements and lessen the load on community banks and other financial institutions," former Florida Governor Jeb Bush told the Fox Business Network in Milwaukee. "We shouldn't have another financial crisis."
Bush's comments, a response to whether he would break up big banks, were similar to ones made by other GOP candidates. The presidential hopefuls criticized the largest U.S. financial institutions as having too much leverage in Washington and an incredible power over the economy. But instead of seeking a breakup of the banks as Democratic presidential candidates Bernie Sanders and long-shot Martin O'Malley proposed, they suggested hikes in big bank capital requirements and a repeal of a number of regulations.
Democratic presidential frontrunner Hillary Clinton hasn't called for breaking up the biggest banks either but she has put out an extensive plan that would seek to protect the Dodd-Frank financial reform law and hike capital requirements on the largest financial institutions with more than $50 billion in assets -- and those capital requirements would grow if they take on more leverage and engage in extensive short-term funding strategies.
In contrast with Democrats, the GOP field urged Congress to repeal the Dodd-Frank Act, which was written in the wake of the 2008 financial crisis. They argued it hurt small community banks and hometown entrepreneurs. In addition, candidates squabbled over whether they would bail out big banks in a future financial crisis.
Until Tuesday Republican candidates have steered clear for the most part from making comments about what they would do, if anything, about big banks.
However, Republican brain surgeon Ben Carson appeared to change his position on breaking up the banks after he suggested to the Heritage Foundation in May that he would reinstate a 1933 Depression-era Glass-Steagall Act. Bringing back the statute, which was essentially neutered by a 1999 law, would essentially force commercial banks out of the investment banking business. Carson told the Heritage Foundation in May that "Glass-Steagall kept the banks from playing fast and loose with money. We kind of did it in the 1990s and it took 20 years to catch up to us."
On Tuesday Carson said he "wouldn't go in and tear anybody down," adding that the U.S. should have policies that won't allow big banks to enlarge themselves at the expense of smaller community institutions. "We should stop tinkering around the edges and fix the actual problems that exist that is creating the problem in the first place."
Sen. Marco Rubio, R-Fla., argued that the big banks have an army of lawyers to deal with the costs of the "thousands of pages of regulations." He blamed Dodd-Frank for codifying too-big-to-fail by creating a category of "Systemically Important Financial Institution" or SIFI, which subjects large financial institutions to tougher capital and liquidity requirements. "These banks go around bragging about it," he said. "They say with a wink and a nod 'we are so big and so important that if we get in trouble the government has to bail us out.' This is an outrage and we have to repeal Dodd-Frank."
Democrats, including an adviser to Democratic presidential front-runner Hillary Clinton, like to point out that at least one big SIFI, General Electric, has been taking steps since April to divest most of its GE Capital unit in an effort to escape the designation. Another, MetLife, has sued the government to escape the categorization, suggesting that some big SIFIs aren't keen on the costs associated with the categorization.
Following up on the line of big bank break up questioning, Ohio Governor John Kasich suggested that Wall Street needs a good ethics lesson. "Free enterprise is great but there has to be some values that underlie it," he said.
When faced with a question about whether he would let "a Bank of America Corp." fail if it were on the brink of collapse, Sen. Ted Cruz, R-Texas, said yes. Cruz, a major critic of the Federal Reserve Board, said the central bank should continue to act as a so-called "lender of last resort" to financial institutions but at higher interest rates. The Fed significantly expanded its lender of last result spending during the crisis and some in Congress have sought to limit it and require congressional approval before it could provide capital injections.
Like Bush and Rubio, Cruz also chimed in against Dodd-Frank. "The big banks get bigger and bigger under Dodd-Frank and community banks go out of business and the consequence of that is small businesses get fewer loans," Cruz said.
The Democratic presidential candidates so far have produced much more specifics on paper about what they would do with Wall Street.
And while tougher hikes in capital are already causing some big banks to slim down, many critics worry that the largest institutions are still very much too-big-to-fail and any effort to hike capital buffers simply gives regulators too much discretion -- and they wouldn't enforce requirements effectively.
Democratic candidates have been unified in their defense of Dodd-Frank, in stark contrast to their Republican rivals. Bush, Rubio, Cruz and Fiorina have criticized the Consumer Financial Protection Bureau, an agency created by Dodd-Frank that writes rules for mortgages and other credit products. The complaints have focused on how the bureau hurts small businesses, small banks, and mortgage borrowers. Meanwhile, Democratic candidates insist that the bureau is critical for protecting consumers from unfair and deceptive mortgages and other financial products.