How the GOP swiped the mantle of populism from Democrats

Consider in this regard the conservative complaints about the concept of “too big to fail.” Dodd-Frank regulates especially large financial institutions more heavily precisely because they pose a systemic threat that creates a moral hazard: Confident that the government couldn’t afford not to bail them out, these institutions have an incentive to run more risk than would otherwise be sensible, because if the risks pay off they keep the profits but if they don’t the government is left holding the bag. Moreover, the legislation also gives the FDIC Orderly Liquidation Authority (OLA) to unwind failed firms in a controlled manner.

But from a populist perspective, giving special treatment to some firms because they are “too big to fail” looks like a way of institutionalizing the problem rather than solving it. Even if that special treatment is described as greater oversight, the mere fact that such a status exists implies that finance and government are formally enmeshed in a way that a populist is bound to see as leading to favoritism — which is precisely what the Tea Party types argued when they said that OLA was a kind of “permanent bailout” and that banks that take big risks that go bad should simply be allowed to fail.

Good progressive technocrats know that’s not realistic. But it’s also not realistic to expect “I’m from the government and I’m here to help” to suddenly become a consistently winning message.