Breaking Up Is Hard To Do
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.
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.
© 2009 The Nation