As Bernie Sanders’ path to the White House narrows, focus in the “Feel the Bern” movement has been shifting to the Democratic party’s national platform, and one crucial plank for the progressives is breaking up the big banks. The idea has been criticized by Democratic leaders, but there’s one surprising group that says it should be done: banking industry experts, including a former Goldman Sachs executive. There are also a couple proposals on how to do it — one requires no new legislation at all — but does Sanders have enough leverage to overcome special interests?
A Politico survey of 55 E.U. and U.S. experts, from executives to academics, showed about 43 percent say that the big banks should be broken up. Another 39 percent said they shouldn’t (the remaining said they weren’t sure). The researchers are quick to point out that the study isn’t a scientific poll but a “pulse-taking exercise” that shows there’s still deep concerns about the banking industry. Those concerns have become a big part of Bernie Sanders’ campaign.
One of the experts explained their reasoning.
“Bank shareholders should risk their own money, not that of taxpayers. Since there is no real technological competition in this industry, amassing big size suffocates true competition and poisons entrepreneurial incentives. Just break them into smaller controllable businesses.”
Another said, “Regulation is sufficiently strict and economies of scale at banks outweigh disadvantages of too-big-to-fail.”
Bernie Sanders is staunchly in support of breaking up the big banks and has criticized Clinton for taking Wall Street campaign money. Clinton’s position, according to Fusion, is that she would only split up the banks if their size posed a significant risk to the U.S. economy. Regulators announced that five of them do — Wells Fargo & Co., Bank of New York Mellon Corp. and State Street Corp. JPMorgan Chase & Co., and Bank of America Corp. — leaving room for Clinton to accept Sanders plank without appearing to “flip-flop.”
According to the Dodd-Frank Act, large U.S. financial institutions are required to file a “living will” with regulators, essentially proving that if they go bankrupt, the U.S. economy won’t go belly up again. The five institutions above failed to make their cases, which allows regulators to take a variety of actions, including the Bernie Sanders’ favorite — breaking them up (after another two year period of tighter regulations).
However, the watch-dogs have been held at bay and the deadline for the banks to file their living wills has been extended to October 1, according to Bloomberg.
Bernie Sanders’ proposal may have the support of industry insiders, and there is a way to do it without signing a new piece of legislation. There’s also the 21st Century Glass-Steagall Act, which would restore a barrier between investment banking and banks that take FDIC-protected deposits removed by former President Bill Clinton. But what about voters?
One of the latest polls shows that 58 percent of likely voters would support “breaking up big banks like Citigroup,” according to the Wall Street Journal. The problem is that poll was conducted by the Progressive Change Institute, hardly an objective source.
A poll from the Huffington Post conducted early 2013 showed that 61 percent of respondents felt the banks had become too big and powerful, but most of them didn’t know enough about the proposal to cut them into smaller units to support it. It’s not clear if American voters still have that opinion three years later.
If Bernie Sanders goes after the banks in full-force, his movement will have a few options to put it on the platform come July. The most extreme would be to file a “minority report,” which Politico Magazine defines as a “public dissent from the official platform.”
Any candidate with over 25 percent of the delegates (Bernie Sanders currently have more than enough) can use that measure, according to platform committee rules. Jesse Jackson proved how fatal creating those divisions can be for the presumptive nominee in his 1988 presidential run against Michael Dukakis. One of the reports even called for backing a Palestinian state.
The reports turned the liberal wing of the party away from Dukakis while also giving fodder to the Republicans, and the Democrats lost.
Hillary Clinton certainly wants to avoid an in-fight; it’s doubtful that Bernie Sanders wants one either. Negotiating the platform will likely be done quietly before the convention, but if breaking up the banks is not one of the planks, it might cost the Democrats in November and the American people later on.
[Photo by John Sommers II/Getty Images]