"Greed is not good. In fact, the greed of Wall Street and corporate America is destroying the very fabric of our nation." - Senator Bernie Sanders
Democratic presidential candidate Bernie Sanders pledged on Tuesday that if elected he would break up "the big banks" by the end of the first year of his administration.
He made the pledge in New York City, where he delivered an address on Wall Street reform and financial policy.
Following are excerpts that give the essence of Sanders' speech.
"In 2008, the taxpayers of this country bailed out Wall Street because we were told they were “too big to fail.” Yet, today, 3 out of the 4 largest financial institutions (JP Morgan Chase, Bank of America and Wells Fargo) are nearly 80 percent bigger than before we bailed them out."
"If a bank is too big to fail, it is too big to exist. When it comes to Wall Street reform that must be our bottom line."
"A handful of huge financial institutions simply have too much economic and political power over this country."
"Within the first 100 days of my administration, I will require the secretary of the Treasury Department to establish a “Too-Big-to Fail” list of commercial banks, shadow banks and insurance companies whose failure would pose a catastrophic risk to the United States economy without a taxpayer bailout."
"And, I will fight to reinstate a 21st Century Glass-Steagall Act to clearly separate commercial banking, investment banking and insurance services. Let’s be clear: this legislation, introduced by my colleague Senator Elizabeth Warren, aims at the heart of the shadow banking system."
"Within one year, my administration will break these institutions up so that they no longer pose a grave threat to the economy as authorized under Section 121 of the Dodd-Frank Act."
"We live in a country today that has an economy that is rigged, a campaign finance system which is corrupt and a criminal justice system which, too often, does not dispense justice.
Not one major Wall Street executive has been prosecuted for causing the near collapse of our entire economy.
That will change under my administration. 'Equal Justice Under Law' will not just be words engraved on the entrance of the Supreme Court. It will be the standard that applies to Wall Street and all Americans."
"The reality is that fraud is the business model on Wall Street. It is not the exception to the rule. It is the rule. And in a weak regulatory climate the likelihood is that Wall Street gets away with a lot more illegal behavior than we know of."
Sanders listed a number of instances of and headlines of stories about big banks engaging in fraud and criminal activity (including laundering money for drug cartels) for which they were fined but no one was prosecuted. Then he said:
"This country can no longer afford to tolerate the culture of fraud and corruption on Wall Street.
Under my administration, Wall Street CEOs will no longer receive a get-out-of jail free card. Big banks will not be too big to fail. Big bankers will not be too big to jail.
As president, I will nominate and appoint people with a track record of standing up to power, rather than those who have made millions defending Wall Street CEOs. Goldman Sachs and other Wall Street banks will not be represented in my administration."
Sanders said he would establish a tax on Wall Street speculators, saying "We will use the revenue from this tax to make public colleges and universities tuition free."
"During the financial crisis, the middle class of this country bailed out Wall Street. Now, it’s Wall Street’s turn to help the middle class."
He talked about how credit-rating agencies are influenced by profit-seeking.
"Under my administration, we will turn for-profit credit rating agencies into nonprofit institutions, independent from Wall Street. No longer will Wall Street be able to pick and choose which credit agency will rate their products."
Sanders pledged to "stop financial institutions from ripping off the American people by charging sky-high interest rates and outrageous fees."
On high credit-card fees:
"The Bible has a term for this practice. It’s called usury. And in The Divine Comedy, Dante reserved a special place in the Seventh Circle of Hell for those who charged people usurious interest rates.
Today, we don’t need the hellfire and the pitch forks, we don’t need the rivers of boiling blood, but we do need a national usury law.
Today, we need to cap interest rates on credit cards and consumer loans at 15 percent."
Pushes Postal Banking
In the speech Sanders promoted Postal Banking, saying:
We also need to give Americans affordable banking options.
The reality is that, unbelievably, millions of low-income Americans live in communities where there are no normal banking services. Today, if you live in a low-income community and you need to cash a check or get a loan to pay for a car repair or a medical emergency, where do you go?
You go to a payday lender who could charge an interest rate of over 300 percent and trap you into a vicious cycle of debt. That is unacceptable.
We need to stop payday lenders from ripping off millions of Americans. Post offices exist in almost every community in our country. One important way to provide decent banking opportunities for low-income communities is to allow the U.S. postal Service to engage in basic banking services, and that’s what I will fight for.
Finally, Sanders called for reforming the Federal Reserve:
"When Wall Street was on the verge of collapse, the Federal Reserve acted with a fierce sense of urgency to save the financial system. We need the Fed to act with the same boldness to combat unemployment and low wages.
Further, we need to structurally reform the Federal Reserve to make it a more democratic institution responsive to the needs of ordinary Americans, not just the billionaires on Wall Street."
"Revitalize American Democracy"
Concluding, Sanders said no president can accomplish needed reforms alone. He called for a political movement to revitalize American democracy.
"No president, not Bernie Sanders or anyone else, can effectively address the economic crises facing the working families of this country alone. The truth is that Wall Street, corporate America, the corporate media and wealthy campaign donors are just too powerful.
What this campaign is about is building a political movement which revitalizes American democracy, which brings millions of people together – black and white, Latino, Asian-American, Native American – young and old, men and women, gay and straight, native-born and immigrant, people of all religions."
"Yes, we can make our economy work for all Americans, not just a handful of wealthy speculators. And, now more than ever, that is exactly what we must do.
And so my message to you today is straightforward: If elected president, I will rein in Wall Street so they can’t crash our economy again.
Will they like me? No. Will they begin to play by the rules if I’m president? You better believe it.
Thank you and I look forward to working with the most powerful force in our great nation, not the Barons of Wall Street but the people our government was created to serve."
Sanders Takes On Clinton Directly
The day before the speech, the Hillary Clinton campaign called on Sanders to endorse her campaign proposals instead of rolling out his own, saying Sanders is proposing a "hands-off approach" to "some of the riskiest institutions and activities in our economy." The Clinton camp says Sanders' previous proposals did not specifically address the "shadow banking" sector, where risky derivatives are traded.
In his speech, Sanders took on his primary opponent by name. One bone of contention between the Sanders and Clinton campaigns is whether the country should restore some form of the Glass-Steagall Act, which separated commercial banking from investment banking and insurance services. Sanders says yes: Banks that take deposits should not be engaged in the kinds of risk-taking that investment banks do as their business model. Clinton says that since this is not what directly led to the 2008 financial collapse, that sort of intermingling should be allowed to continue.
Sanders also proposes to break up the largest Wall Street banks because of their power. Clinton would instead require a risk fee on large financial firms and require them to reorganize, downsize or break apart if needed.
Sanders said in his speech:
My opponent says that, as a senator, she told bankers to “cut it out” and end their destructive behavior. But, in my view, establishment politicians are the ones who need to “cut it out.”
"Now, my opponent, Secretary Clinton, says that Glass-Steagall would not have prevented the financial crisis because shadow banks like AIG and Lehman Brothers, not big commercial banks, were the real culprits.
Secretary Clinton is wrong.
Shadow banks did gamble recklessly, but where did that money come from? It came from the federally insured bank deposits of big commercial banks – something that would have been banned under the Glass-Steagall Act."
Sanders proposes to break up the big banks, saying their size and power distorts our economy, legal system and politics. Clinton's proposals are more about allowing them to operate largely as they do today but regulating them to prevent another financial crash.
See October 2015's post, "Clinton vs. Sanders vs. O'Malley On Fixing Banking."