Last night Hillary Clinton insisted to Stephen Colbert that, as president, she would not bail out failing big banks.
The truth is, that’s probably a campaign fib, but one that she might well be justified in telling.
Clinton’s statement was pretty emphatic. In fact, when the Late Show host raised the failing banks question, she responded, “yes, yes, yes, yes, yes, yes, yes.” The only problem? Back in the dark days of 2008, when then-Senator Clinton was in fact called to vote on the Troubled Asset Relief Program, a program which authorized the government to spend a whopping $700 billion to bail out failing banks, she voted in favor (in contrast to her main Democratic rival Bernie Sanders).
To be sure, Clinton does have a partial out: In her Colbert interview, she quickly mentions the 2010 Dodd-Frank bill, which is supposed to unwind failing banks in a more orderly fashion and preclude the need for future bailouts. But that doesn’t fully explain away her remarks. After all, what if despite the protocols laid out by Dodd-Frank, a future banking crisis seems to imperil the economy anyway?
It’s pretty hard to imagine that in a real crisis, Clinton — a candidate whose very appeal in large part derives from her practical approach to politics — would stand on principle and refuse to offer banks another handout, even if that meant letting the economy collapse on her watch.
So does that make her a hypocrite? Not necessarily. While coming to the aid of banks probably was — and would be — the right thing to do, admitting it ahead of time is never smart. Think of it this way, if banks know that the President will come to their aid once they get in trouble — because she said so on national television — they don’t have much incentive to be careful with other people’s hard-earned money. It’s a concept that economists call moral hazard, and always a tricky problem for politicians to navigate. In other words, while voters generally should demand that politicians tell the truth, sometimes a little guile works too.