Breaking Up Is Hard To Do
Katrina vanden Heuvel
The Nation: 11/12/2009
When it comes to understanding the real economy and the struggles of
ordinary Americans, Senator Bernie Sanders always seems to be ahead of the
curve and fighting like hell for Congress to show leadership and be
responsive.
Now he's doing it once again with his legislation to break up the Too Big To
Fail financial institutions that pose a threat to our entire economy.
Sanders coined the phrase, "If you're too big to fail, you're too big to
exist," back when he voted against the initial Wall Street Bailout in
October 2008. Now, none other than former Fed Chairmen Alan Greenspan and
Paul Volcker are parroting it, and a lot of other notables from across the
political spectrum have come around to support busting up the banks too, as
the Senator describes below.
The bill itself is a thing of beauty in its simplicity (and length! only two
pages in this age of 1000-page behemoths!). It would give Treasury Secretary
Timothy Geithner 90 days to compile a list of commercial banks, investment
banks, hedge funds and insurance companies that he deems too big to fail,
including "any entity that has grown so large that its failure would have a
catastrophic effect on the stability of either the financial system or the
United States economy without substantial Government assistance." Within one
year after the legislation becomes law, the Treasury Department would be
required to break up those financial institutions.
I spoke with Senator Sanders about the bill, its potential, and the
challenge of organizing to take on Wall Street. Here is what he had to say:
Q: Where do things stand right now with the legislation?
Sen. Sanders: We introduced it a couple of days ago. It's getting a lot of
interest and support all over the country. On our website, we have a
petition, and we have over 11,000 signatures on it already. There is some
interest from some of my colleagues to push forward. And I think--what it
does--maybe most importantly, what you are seeing all over the country right
now are people from different perspectives who are coming out in support of
the concept of breaking these guys up. I mean, you have people--from former
Fed Chairman Alan Greenspan himself, who more than anybody else led us to
this deregulatory nightmare--beginning to rethink that. You have the
government of the United Kingdom actually moving forward to start breaking
up some of their large financial institutions. Former Fed Chairman Paul
Volcker, former Labor Secretary Robert Reich, FDIC Chair Sheila Bair.... And
then just a few days ago John Reed--who did not write the story of the
Russian Revolution, I suppose--he was the former CEO of Citigroup, and he
apologized. He came forward and he apologized to the American people for his
activities in helping to engineer the deregulation effort.....
So I think what you got is a number of things here. Number one, a year after
the financial crisis and the bailout, three out of the four largest
financial institutions that were too big to fail are now bigger than they
were before. Which puts us in a position to see next time around an even
larger bailout. I think the American people think that that is pretty crazy,
and I think maybe we should learn a lesson from some of our good Republican
presidents like Teddy Roosevelt, William Howard Taft, who went after these
big monopolies and broke them up.... We cannot simply go back to where we
were before the crisis--maybe even in a more dangerous position with these
'too big to fail' institutions even bigger than they were--we've gotta break
them up.
Number two, which is not talked about terribly much--is that it's not only
the question of taxpayer liability for another bailout, but it is the
concentration of ownership in the industry, and what that means for
consumers. So for example, you have the four largest banks in America--and
that is Bank of America, Wells Fargo, JP Morgan Chase, and Citigroup--now
issue one out of every two mortgages.... They issue 2 out of every 3 credit
cards. And, we get calls every single day, from people who have seen their
interest rates double, despite paying their bills on time. So you have these
large banks charging people 25, 30 percent interest rates which is just
unconscionable. And I think the fact that you have four large banks issuing
2 out of 3 credit cards clearly contributes to those outrageously high
rates. And then you have 4 out of every 10 bank deposits in the country
being held by these four institutions. So above and beyond this issue of
'too big to fail' and the liability to taxpayers, is this concentration of
ownership and what that means to consumers.
Third issue, not unrelated, is that our goal has got to be to get money from
Wall Street into the productive economy--into small and medium-sized
businesses--which unlike Wall Street are not gambling casinos but are
actually producing real products and real services and creating real jobs.
And I think you do that with more competition in financial services rather
than what you have right now.
And maybe the last issue is that--you know, some of my colleagues talk about
regulating Wall Street. I think the evidence is pretty clear that it is Wall
Street that regulates the Congress. Over a 10-year period, Wall Street has
put $5 billion into lobbying and campaign contributions. They were extremely
effective in doing away with Glass-Steagall and moving toward deregulation.
They had the leadership of both parties working for their interests. And I
think when you leave an institution like Wall Street so powerful, with so
much wealth, it is very hard to imagine that Congress can in fact stand up
to them.
So I think those are the reasons why we've gotta proceed in terms of
breaking them up.
Q: So how do you organize to take on Wall Street? Is this legislation a
vehicle to do that?
Sen. Sanders: I think it is. Because it is simple. It has historical
precedent in the sense that this is what Presidents Roosevelt and Taft did,
early 1900s. So our job is to rally the American people to put pressure on
Congress to do it. But, having said that, taking on Wall Street to say the
least is not easy. These people are unbelievably powerful. But we've thrown
down the gauntlet here, and we're trying our best to rally support at the
grassroots and in Congress itself.
Q: So, you mentioned Volcker, Greenspan, Reich--do you anticipate them
coming into the Senate for a hearing on this?
Sen. Sanders: We have got to figure out a venue.... We're going to work
every angle that we can in order to bring proponents of this concept
together--and there are many of them out there. And what's interesting,
you're going to bring conservatives and progressives around on this issue.
So our job is to figure out ways to do that, and to put pressure on the
Congress to go forward on it.
Q: Are you concerned that if progressives and Democrats in Congress don't
act on this--the right-wing will start tapping into this populist anger--
Sen. Sanders: I have thought from Day One that one of the problems that the
Obama Administration has had across the board--from conservatives to
progressives--is an unwillingness to take on Wall Street in a strong way.
And I think there is a real possibility that you may see some of these guys
from the South, or elsewhere in the country--conservative Republicans--who
can start taking on Wall Street if the Democrats are not prepared to do so.
And I think when you look at Wall Street money--believe me, it's not just
coming into the Republican party, I think we know that.
Q: So is President Obama an ally or an obstacle when it comes to this kind
of commonsense change?
Sen. Sanders: You know, I have a lot of respect and affection for the
President, but I think on the issue of Wall Street he has not been a strong
ally in attempting to hold these large financial institutions accountable,
or moving them in a direction which would demand that they start investing
in the productive economy. And that we do not return to where we were before
the collapse.
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