Bernie Sanders campaign fires off an early shot:
“Never again should a financial institution be able to demand a federal bailout,” Sherman said. “They claim; ‘If we go down, the economy is going down with us,’ but by breaking up these institutions long before they face a crisis, we ensure a healthy financial system where medium-sized institutions can compete in the free market.”
The 2008 financial crisis had a devastating impact on the U.S. economy. It cost as much as $14 trillion, the Dallas Federal Reserve calculated. The Government Accountability Office pegged the cost at $13 trillion. The Congressional Budget Office estimated that the crisis nearly doubled the national debt and cost more than the Bush tax cuts and the wars in Iraq and Afghanistan combined.
The six largest U.S. financial institutions today have assets of some $10 trillion, an amount equal to almost 60 percent of gross domestic product. They handle more than two-thirds of all credit card purchases, control nearly 50 percent of all bank deposits, and control over 95 percent of the $240 trillion in derivatives held by commercial banks.
The Sanders and Sherman legislation would give banking regulators 90 days to identify commercial banks, investment banks, hedge funds, insurance companies and other entities whose “failure would have a catastrophic effect on the stability of either the financial system or the United States economy without substantial government assistance.”
While being well aware this will never pass, it’s the sort of thing that makes some sense and part of me very much wants to see it pass just to see “what if“?
Sanders further comments on the HuffPo Politics blog:
It should make every American very nervous that in this weak regulatory environment, the financial supervisors in this country and around the world are still able to uncover an enormous amount of fraud on Wall Street to this day. I fear very much that the financial system is even more fragile than many people may perceive. This huge issue cannot be swept under the rug. It has got to be addressed.
Although I voted for Dodd-Frank, I did so knowing it was a modest piece of legislation. Dodd-Frank did not end much of the casino-style gambling on Wall Street. In fact, much of this reckless activity is still going on today.
The Hill can’t resist comparing Sanders to Senator Elizabeth Warren, who is not running:
The overlap between Sanders’s message and the one frequently espoused by Warren was indistinguishable at one point.
“The function of banking should be boring,” said Sanders on Wednesday.
Warren has frequently sung from the “banking should be boring” hymnal, doing so most recently in a speech in April.
“If banks want access to government-provided deposit insurance, they should be limited to boring banking,” she said.
When Sanders launched his presidential campaign earlier this month, he earned plaudits from liberal grassroots groups for his long record on fighting inequality and battling the nation’s most powerful. Many of those same groups also said they were still waiting for Warren to jump into the race.
George Zornick at The Nation sees Sanders as creating a litmus test for Presidential candidate Hillary Clinton, as well as currently sitting legislators:
The prospects of this bill passing in a Republican-controlled Congress approach absolute zero. Sanders acknowledged that reality, but said the legislation presents a basic test for legislators.
“When Wall Street tells members of the Congress not to do anything that will damage their interests, most members of Congress adhere to that,” he said. “Can we pass legislation in the United States Congress that Wall Street opposes?”
It also unavoidably poses a test for Hillary Clinton, the other declared Democratic candidate. Much of the Draft Warren movement launched by progressive activists focused on the Massachusetts senator’s advocacy for combating the financial sector’s power generally, and breaking up the big banks in particular—and Clinton’s perceived weakness on that front.
George also notes that potential candidate and former Governor O’Malley recently wrote an op-ed of a similar nature. I think this strategy is good – get uncomfortable questions out there about an industry which can hardly be said to be a free market, given how many of these huge banks benefited from bargain prices on their road-kill prey.
Community bankers are hip to it:
That sounds like a good idea to the Independent Community Bankers of America, a trade association representing more than 6,000 banks across the country.
“ICBA agrees that the too-big-to-fail megabanks are too big to exist,” said ICBA President and CEO Camden Fine. “After triggering a historic financial crisis and receiving trillions of dollars in taxpayer assistance, the nation’s largest and riskiest financial institutions continue to pose systemic threats to our economy while enjoying an artificial funding advantage subsidized by taxpayers.”
The left is on the march, and the billionaires and corporations are in for a fight.
