As Rob Blackwell made clear in his Banker article on Thursday, Sen. Warren has mobilized the theme that brought her to the front of the campaign trail – converting Wall Street into a garden path – with one of the comprehensive, detailed platforms that have distinguished her from the platitudes that often characterize political rhetoric.  With an acute sense for the jugular, the post on Thursday detailing her proposals subsumed them all within the “economic patriotism” rubric that served her well a few weeks ago when she pressed for protectionism and exchange-rate controls.  It’s too early to tell if this latest salvo will boost her presidential prospects, but it’s clear to me how savvy it is.  If anything goes wrong in the markets or any big bank is seen to sin or some plutocrat engages in consumption too splendiferous to ignore, then she’s on it.  Indeed, she’s not only got a program at the ready, but it’s also insulated from President Trump’s “socialist” epithet because it’s pre-branded as patriotism.

To be sure, Sen. Warren’s post is replete with misleading assertions.  For example, she says that, “Financial sector profits have gone from 10% to 25% of total corporate profits but everyone else in America has lived through a generation of stagnant wages and sluggish economic growth.”  Each part of the sentence appears correct, but profitability doesn’t measure the productivity essential to economic opportunity.  In fact, economic inequality has little to do with the “looting” Sen. Warren alleges and far more to do with structural change wrought by an array of demographic, manufacturing, fiscal, educational-system, globalization, and financial-policy decisions.  See our Economic Equality blog for why I think post-crisis financial policy has played a disproportionate role accelerating inequality and why much of what Sen. Warren wants would make it even worse.

However, given the way the campaign is going, her platform should be taken with the utmost seriousness.  I noted in an American Banker op-ed and a blog post, the idea of a Post Office Bank resonates because essential banking services for low-income households from a trusted, secure source are getting harder and harder to find.

Bankers appalled that Sen. Warren resurrected the Post Office Bank should not only understand the reasons for its lasting appeal, but also that there’s another, still more worrisome public-bank idea loose upon the land:  turning the Federal Reserve into a gigantic retail bank.  Sen. Warren’s acolytes like this a lot, and she, like many other progressives, has now focused on calls to ensure that the Fed – not private banks – own and operate a national faster payment system.  Intriguingly, even the IMF is flirting with a variation on this that would give tech-platform banks access to a central bank in hopes that they would rebate interest on reserves to retail consumers.  Depending on how this plays out, banks could be faced not only with a rival Post Office Bank, but also a Federal Reserve retail window, and tech-platform companies emboldened by central-bank access.

The political imperative behind alternatives to private banking is also clear in the reaction to Facebook’s Libra.  When I was asked about this on CNBC earlier this week, the interviewer’s best defense for Facebook rested on “financial inclusion” – the same theme that Republicans mustered on the new product’s behalf during all the hearings this week.  The Wall Street Journal today mounted a similar defense. 

This won’t protect Facebook from all the fury Libra has wrought, but how many more adroit firms will fly the financial-inclusion flag to disintermediate banks?  Tech-platform companies are clearly readying formidable networks and market power to replicate aspects of Libra without the crypto flourish that doomed it with the G7. 

Regulated banking, especially very big banking, is thus in the middle of a circular firing squad.  Some of those aiming at it are progressives like Sen. Warren who are speaking for many in the market; others are companies that aren’t just talking, they’re building new products with considerable capacity to match banks step by step and the political acumen to learn from Libra’s mistakes.  Libra’s have been formidable stumbles, but more intrepid competitors may well take its place, capturing as much of the disdain for big banks that Sen. Warren espouses to sideline as many of them as possible.