Until last night. Despite Sanders’ tougher positions-he wants to break up big banks and go way beyond the Dodd-Frank banking regulation-Hillary was able to put forth a more sophisticated message about the financial system during the course of the first Democratic debate.
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On the issue of immigration, Bernie Sanders has been forced to explain a few history – namely, why he opposed the attempt at an immigration overhaul in 2007.
Then there’s flip-flopper Lincoln Chafee. Now he regrets it.
In 1999, under President Clinton, a part of the Glass- Steagall Act was repealed in what was known as the Gramm-Leach-Bliley Act (GLBA).
This summer, four USA senators working across party lines, including John McCain (R-Ariz.) and Elizabeth Warren (D-Mass.), who has been mentioned as a potential Presidential candidate introduced a bill that would return a few of the Depression-era Glass Steagall’s closer scrutiny of financial services companies.
President Barack Obama said much the same thing in 2008 and that proved to be wishful thinking as his Justice Department appointees declined to prosecute individual bank executives and his “tough” regulatory appointments, such as Mary Jo White as chair of the Securities and Exchange Commission, turned out to be paper tigers.
The law was enacted after the stock market crash of 1929 and the Depression that followed. CNN’s Maggie Lake discusses the Glass-Steagall Act and why it matters with Here & Now’s Jeremy Hobson.
The law was done away with in 1999 by Congress and President Bill Clinton. Mr. Sanders is more focused on reducing the size and political influence of the biggest banks.
So get ready for more flawless.
The result was that more banks joined forces and got even bigger.
There’s a lot of debate about the role the repeal of Glass-Steagall played in the financial crisis.
That played into a Wall Street culture of excess, big bonuses and poor decision making.
Congress does not regulate Wall Street. “Wall Street regulates Congress”, Sanders said in the debate to much applause.
But the two investment banks were regulated by the SEC – which failed miserably in its supervision – and insurer AIG was regulated by state authorities in its insurance business (which created no problems) and by the Office of Thrift Supervision in its non-insurance activities – a federal regulator that has been shut down because it was so ineffective. Clinton is also being advised on this topic by a former Goldman Sachs official and a current banking official. Shadow banking has grown like topsy since the financial crisis, in large part because big banks have deleveraged their balance sheets and risk has migrated to the shadow areas of finance. Progressives have pushed candidates to embrace bringing back the law.
Democrats have proposed new rules that would essentially bring back a Glass-Steagall type of firewall separating a big bank’s consumer operations from its investing division.
Clinton and the Republican candidates do not want to reinstate Glass-Steagall. But she thinks Glass-Steagall is too outdated and blunt of an instrument.
Despite similarities, though, Clinton and O’Malley have released far more comprehensive plans than Sanders.
Clinton’s lengthy proposals surprised a few analysts who wondered how tough she would get on an industry that has provided the lion’s share of her campaign funding.
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Her plan would increase regulation and oversight of the financial world and impose a “risk fee” on large banks with over $50 billion in assets. “Breaking up the banks is just a slogan – exactly how to do it is the problem”. There are also hedge funds and other players that wouldn’t fall under Glass-Steagall.
