Here’s a sentence from the Democratic Party’s recently released draft platform:
“We will reform the Federal Reserve so that it is more representative of America as a whole, and we will fight to make sure that executives at financial institutions are not allowed to serve on the boards of regional Federal Reserve banks or select its members.”
This sentence hasn't received much, if any, media attention. How important is it? Do party platforms even matter?
Foxes in the Henhouse
As our nation's central bank, the Federal Reserve exerts tremendous control over our nation's banks. Unfortunately, it is also largely controlled by them. Too often, it fails to reflect the will of the people whose representatives created it.
Some of us have been pushing for radical reform of the Fed’s governing structure for a long time. I proposed removing bankers from Fed boards in 2012 and called the idea of representative governance "the People’s Fed” in 2014.
JPMorgan Chase CEO Jamie Dimon, whose bank has an incredibly long laundry list of frauds and other major crimes1, served on the Federal Reserve’s board for years. This powerful banker – whose institution is supposedly regulated by the Fed – even sat on the committee that determines the pay of senior Fed executives and approves their performance reviews.
Another Fed board member was the banking industry’s top lobbyist and a senior executive for Wachovia Bank, an institution whose many scandals and crimes included deceptively packaging its toxic subprime mortgage-backed securities; rigging municipal bond bids, which led to a $148 million fine; and, worst of all, laundering $378 billion in drug money for the Mexican cartels that have murdered at least 85,000 people.
That last item meant, as we (perhaps indelicately) noted at the time, that she was probably only two or three degrees of Kevin Bacon away from the cartel leader known as “El Loco" – “the Madman.” That gentleman was arrested in 2012 for beheading 49 people and dumping their bodies in the town square.
Banking for the People
Most people would probably agree that preventing someone like that banker from setting policy for our central bank would be a good thing. The draft platform language is a step in the right direction.
The draft Democratic Party platform also supports "postal banking,” which would let post offices provide basic banking services. That's a function they performed from 1910 until 1966.
An updated and expanded form of postal banking would be especially helpful to lower-income individuals and communities, who have been especially ill-served by Wall Street.
The Fine Print
Granted, the wording on these proposals is too limited. While it’s laudable to call for a Fed that is "more representative of America as a whole," the language about bankers is restricted to the boards of regional Federal Reserve banks. It apparently would not prevent bankers from serving at the national level, as Chase’s Dimon did.
And, while the draft platform calls for more regulation of Wall Street and suggests that bankers who commit fraud should be prosecuted, these proposals lack specificity. The platform draft also says that “no bank can be too big to fail,”and calls for "an updated and modernized version of Glass-Steagall," the clearly needed law that before it was repealed in the 1990s kept banks out of high-risk trading with depositors' dollars.
With party platforms, as with other documents, you need to read the fine print.
But these proposals, however limited, add political momentum to the movement for a more democratized banking system. As the party's platform committee meets this weekend, it should be urged to adopt these words – or, better yet, even stronger language – into its final draft.
If nothing else, party platforms are useful historical artifacts. The 1956 Republican Party platform boasted about the rise in union membership under GOP President Dwight D. Eisenhower. It declared that “the protection of the right of workers to organize into unions and to bargain collectively is the firm and permanent policy” of the Republican Party, and bragged about the expansion of Social Security during Eisenhower’s first term.
That didn’t stop the GOP from eventually lurching to the farthest edges of the extreme right, of course. But these words both reflected and reinforced the political climate of the 1950s.
At the other end of the spectrum, Democratic President Bill Clinton's 1996 party platform called for "the end of the era of big government." Those words, too, reflected and reinforced the prevailing political mood.
At a minimum, the left-leaning bank rhetoric in this year’s Democratic draft platform marks the political distance between the politics of the 1990s and those of today.
Cynics – perhaps a better word is “realists” – remind us that party platforms are routinely ignored after the election. Will this language, assuming it makes it into the final document, actually lead to concrete change? Needless to say, Democrats aren’t contractually bound to fight for the policies in the party platform. And they’ll be under tremendous pressure from donors to cave on critical financial issues.
Just as war is too important to be left to the generals, politics is too important to be left to the politicians. This platform language may not be binding, but it's a useful tool in the hands of committed activists. An independent movement – call it a "political revolution" if you like – can demand that Democrats honor the commitments they made during this campaign.
The answer to the question, "Does this language really matter?" doesn’t lie with Hillary Clinton, or Debbie Wasserman Schultz, or the Democratic Party as an institution. It lies with the people themselves. The real importance of this language lies in the fact that an army of committed activists can use it as a tool to demand change.
Can a few words in the Democratic Party platform really change the future of American banking? Not without a movement that's determined to make that change happen.
1Here’s a short list of JPMorgan Chase’s crimes, courtesy of David Dayen:
“Bank Secrecy Act violations; money laundering for drug cartels; violations of sanction orders against Cuba, Iran, Sudan, and former Liberian strongman Charles Taylor; executing fictitious trades where the customer … was on both sides of the deal; misrepresentations of CDOs and mortgage-backed securities; violations of the Servicemembers Civil Relief Act; fraudulent sale of unregistered securities; auto-finance deceptions; violations of state and federal ERISA laws; filing of unverified affidavits for credit card debt collections; energy market manipulation that triggered FERC lawsuits; ‘artificial market making’ at Japanese affiliates; shifting trading losses on a currency trade to a customer account; fraudulent sales of derivatives to the city of Milan, Italy; and obstruction of justice (including refusing the release of documents in the Bernie Madoff case).”