Democratic presidential candidate Hillary Clinton kept things light at the "cathedral of Colbert," as she called it, but her appearance on the "Late Show" revealed at least one policy rift between her and President Obama: Clinton would let big banks fail.

"If you're president and the banks are failing, do we let them fail?" host Stephen Colbert asked.

"Yes, yes, yes, yes, yes, yes, yes," Clinton answered emphatically. "First of all, under Dodd-Frank, that is what will happen because we now have stress tests and I'm going to impose a risk fee on the big bank if they engage in risky behavior. But they have to know, their shareholders have to know that yes, they will fail. And if they're too big to fail, then under my plan and others that have been proposed, they may have to be broken up."

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Clinton has previously voiced her support for Dodd-Frank, a financial regulation reform law passed after the 2007-08 financial crisis, but in recent weeks, she has emphasized need for tougher banking regulation.

"[I]f you can't manage it, it's more likely to fail," Clinton added.

Part of the front-runner's platform involves holding Wall Street accountable—to punish criminal behavior in the financial sector, increase oversight of hedge funds and investment firms, impose fees on short-term excessive leverage and short-term borrowing, and tax short-term trading. She outlined her plans for financial reform in a recent Bloomberg op-ed.

"The bottom line is that we can never allow what happened in 2008 to happen again," Clinton wrote. "Just as important, we have to encourage Wall Street to live up to its proper role in our economy—helping Main Street grow and prosper."

"With strong rules of the road and smart incentives, the financial industry can help more young families buy that first home, make it possible for entrepreneurs to create new small businesses and support hardworking Americans saving for retirement. My plan will help us unlock that potential."

Clinton and Colbert also talked about how the candidate celebrated her 68th birthday ("Bill and I just kind of watched bad TV") and what to dress up as for Halloween.