After Bernie Sanders’ interview with the New York Daily News last week, he was taken to task by many in the media and Hillary Clinton for not clearly articulating precisely how he would execute on his campaign promise to “break up the big banks.”
Setting aside the nit-picking minutiae of daily journalism, with its “gotcha” mentality, Sanders’ approach harkens back to a bygone era – one he alluded to it early in the Daily News interview:
“And I think that if somebody, like if Teddy Roosevelt were alive today, he would look at that. Forgetting even the risk element, the bailout element, and just look at the kind of financial power that these guys have, would say that is too much power.”
What Sanders is proposing is not a tweak to the existing system. It is akin to the trust busting era ushered in by Teddy Roosevelt and the Progressive movement at the turn of the last century.
Hillary Clinton, by contrast, favors strengthening the current system but not fundamentally altering it. She defends the repeal of Glass-Steagall in the late 1990’s which prohibited banks from engaging in both commercial and investment banking. And she supports Dodd-Frank which was passed in 2010 to regulate the risky financial behaviors that led to the crisis of 2008.
But under Dodd-Frank, as Berkeley economist and former Labor Secretary Robert Reich points out, the big banks – JP Morgan Chase, Citibank, Goldman Sachs, Well Fargo and Bank of America among others – have only gotten bigger, and many of the regulations that were supposed to mitigate risk have yet to be implemented.
There is a strong argument to be made that Dodd-Frank has been hijacked by the big banks. It isn’t working and is unlikely to prevent another major financial crisis.
Reich writes on his blog in a post entitled Bernie and the Big Banks:
“The bottom line: Regulation won’t end the Street’s abuses. The Street has too much firepower. And because it continues to be a major source of campaign funding, no set of regulations will be tough enough. So the biggest banks must be busted up.”
Hillary Clinton disagrees, but then, as Sanders repeatedly suggests, she is a major recipient of Wall Street campaign donations. Supporting the current regulatory system, as Clinton does, works to the advantage of the big banks because they get to write the rules.
Taking his cue from Teddy Roosevelt and the Progressives, Bernie is right – it is time to break up the big banks.
Sometimes you need to think big and act boldly to get the job done.