U.S. Sen. Bernie Sanders testified in 2010 in support of U.S. Sen. Christopher Dodd’s (D-CT) Restoring American Financial Stability Act. Reconciled with Rep. Barney Frank’s (D-MA) bill, it became the Dodd-Frank Wall Street Reform & Consumer Protection Act Video Courtesy Catholics 4Bernie/Youtube
At question was the senator’s knowledge base on the workings of Wall Street and Executive Office powers conferred via the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173).
Dodd-Frank reigns in Wall Street
Dodd-Frank was penned by Sen. Christopher Dodd (D-CT) and Rep. Barnie Frank (D-MA) in 2009 – 2010. The Act was passed by the 111th U.S. Congress and became law on July 21, 2010.
“The time is now for the United States Senate to begin to deal with the greed, the recklessness and the illegal behavior on Wall Street. The American people have demanded action since this crisis began and we owe it to them to deliver.” ~ U.S. Sen. Bernie Sanders, Senate Floor May 2010
Sanders supported Dodd’s Senate-side bill, The Restoring American Financial Stability Act of 2010, a bipartisan bill aimed at restoring transparency and control over Wall Street machinations. Sanders proposed amendments to strengthen government oversight of “big money” in favor of the American consumer. The bill saw more than 430 bipartisan amendments proposed before passage.
Upon its passage in 2010, Dodd-Frank increased consumer protections while creating a federal oversight agency with direct report to the legislative and executive branches of the government.
Timing not so perfect
The Clinton camp released a transcript of the April 1 interview in an email on Tuesday morning, just a few hours after polls opened in the Wisconsin Primary where Sanders was predicted to win.
“In case you missed it, Senator Sanders met with the New York Daily News‘ Editorial Board. The Daily News has posted a transcript of the interview online, the entirety of which is a must read for those covering or following this race,” the opening read.
Prior to the carefully crafted Clinton-New York Daily News politicking, the two camps were locked in a back and forth battle over the scheduling of a Democratic debate in New York prior to the April 19 primary.
The release to supporters and media outlets, an apparent attempt to discredit Sanders platform on primary day, fell flat. Sanders won the primary by double-digit numbers, receiving congratulations from Clinton via a Twitter post.
The continued attack by Clinton’s camp, an email blast of negative media, overshadowed Sanders victory, and cast negative connotations of his abilities prior to the debate finally scheduled for April 15 on ABC’s Good Morning America.
Sanders, Dodd-Frank and Financial Stability
Sanders, a long-time proponent of Dodd-Frank, has been consistent in his pledge to utilize the Act and executive powers to break up the big banks should he become President.
“How you go about doing it is having legislation passed, or giving the authority to the Secretary of Treasury to determine, under Dodd-Frank, that these banks are a danger to the economy over the problem of too-big-to-fail.” – U.S. Sen. Bernie Sanders to New York Daily News Editorial Board, April 1, 2016
Sanders plan involves using Section 121 of the Dodd-Frank Act requiring the Federal Reserve, after obtaining the approval of the Financial Stability Oversight Council (FSOC), to order certain financial companies to sell or otherwise transfer assets or off-balance-sheet items to unaffiliated entities.
That order comes into play “if the Fed determines that the company poses a grave threat to the nation’s financial stability and other, less drastic measures are inadequate to mitigate the threat.”
According to the FOSC, it has three main objectives.
1. To identify risks to the financial stability of the United States that could arise from the material financial distress or failure, or ongoing activities, of large, interconnected bank holding companies or nonbank financial companies, or that could arise outside the financial services marketplace;
2. To promote market discipline, by eliminating expectations on the part of shareholders, creditors, and counterparties of such companies that the U.S. government will shield them from losses in the event of failure; and
3. To respond to emerging threats to the stability of the U.S. financial system.
Media outlets spar
Headlines portrayed a murky, out of context exploitation of Sanders’ comments and a demeaning portrayal of his understanding of Wall Street banking principles and regulatory legislation.
“This New York Daily News interview was pretty close to a disaster for Bernie Sanders” wrote Chris Cizillaof the Washington Post. Business Insider wrote, “Bernie Sanders struggled to explain his Wall Street plans in an uncomfortable new interview.”
Marketwatch, had a more realistic headline pertaining directly to the drama created by what was supposed to be a professional interview prior to the NYDN endorsement of a candidate. “Bernie Sanders criticized for lack of detail on breaking up banks,” the financial news outlet wrote.
Agency vs. branch of government
Sanders comments weren’t as bad as portrayed in print. A portion of the transcript revealed that Sanders was, invariably consistent in his knowledge of the legislation he supported. The Board repeatedly asked Sanders questions about the Federal Reserve (the Fed) confusing the regulatory agency’s duties with that of the Executive Office.
- Daily News: But do you think that the Fed, now, has that authority?
- Sanders: Well, I don’t know if the Fed has it. But I think the administration can have it.
- Daily News: How? How does a President turn to JPMorgan Chase, or have the Treasury turn to any of those banks and say, “Now you must `do X, Y and Z?”
- Sanders: Well, you do have authority under the Dodd-Frank legislation to do that, make that determination.
The Sanders camp also released the NYDN transcript and responded to Clinton’s attacks.
Sanders Communications Director, Michael Briggs, in an email on Wednesday, offered an article penned byMike Konczal for the Roosevelt Institute.
Titled “Let’s Dispel Once and for All With This Fiction that Sanders Doesn’t Know How to Break Up Banks” Konczal explains Sanders platform and mechanisms for breaking up the banks.
“Sanders has a two-part approach to breaking up the banks and knows who can do it,” Konczal wrote. “There are three ways we can break up the banks.”
1. Pass a law putting some sort of cap on the size of the balance sheet of financial companies, usually non-deposit liabilities. Caps, such as Senator Brown’s SAFE Banking Act, are generally proposed around 2 or 3 percent of GDP.
2. Have the council of regulators known as the Financial Stability Oversight Council (FSOC), on which the Treasury Secretary serves as chair, declare the largest firms to be too risky and must be broken up (Section 121).
3. Have the Federal Reserve, along with the FDIC, determine that the “living wills” of the biggest banks, which are plans on how they can fail without bringing down the economy, are not credible, and thus must be broken up (Section 165d).
The somewhat cordial relationship between the Sanders and Clinton camps deteriorated quickly over the last two months as Sanders continued to close the gap on the former First Lady and Secretary of State.
Sanders won seven of the last eight Democratic contests against Clinton and intends to remain “until the last vote is cast.”
The two contenders go head-to-head again on Saturday in the Wyoming caucus. Sanders is leading in the Wyoming polls as of Wednesday by a small margin.