More of the Same or Real Reform?

“The Big Short” and Bernie’s Plan to Bust Up Wall Street
by Robert Reich
Monday, January 11, 2016

Hillary Clinton doesn’t want to break up the big banks or resurrect the Glass-Steagall Act, as Bernie does

Instead, she’d charge the big banks a bit more for carrying lots of debt and to oversee them more carefully. She’d also give bank regulators more power to break up any particular bank that they consider too risky. And she wants more oversight of so-called “shadow banks” such as hedge funds and insurance companies like the infamous AIG.

In a world where the giant Wall Street banks didn’t have huge political power, these measures might be enough. But, if you hadn’t noticed, Wall Street wields extraordinary power.

Which helps explain why no Wall Street executive has been indicted for the fraudulent behavior that led up to the 2008 crash. Or for the criminal price-fixing scheme settled last May. And why even the fines imposed on the banks have been only a fraction of the banks’ gains.

And also why Dodd-Frank is being watered down into vapidity. For example, the law requires major banks to prepare “living wills” describing how they’d unwind their operations if they get into serious trouble. But no big bank has come up with one that passes muster. Federal investigators have found them all “unrealistic.”

Most of Hillary’s proposals could already have been put into effect by the Fed and the Securities and Exchange Commission, but they haven’t been – presumably because of the Street’s muscle.

As a practical matter, then, her proposals are invitations to more dilution and finagle.

The only way to contain the Street’s excesses is by taking on its economic and political power directly – with reforms so big, bold, and public they can’t be watered down. Starting with busting up the biggest banks, as Bernie Sanders proposes.

More than a century ago, Teddy Roosevelt broke up the Standard Oil Trust because it posed a danger to the U.S. economy. Today, Wall Street’s biggest banks pose an even greater danger. They’re far larger than they were before the crash of 2008.

Unless they’re broken up and Glass-Steagall resurrected, we face substantial risk of another near-meltdown – once again threatening the incomes, jobs, savings, and homes of millions of Americans.

To paraphrase philosopher George Santayana, those who cannot remember they were screwed by Wall Street are condemned to be screwed again.