On foreign policy, the issue that is generally considered your greatest weakness, I believe that you have consistently shown yourself to be responsible, inquisitive and level-headed. And you and Secretary Clinton have run campaigns which, a few stumbles aside, stand in such stark contrast to the GOP field that it is difficult to fathom how anyone could possibly consider any of them over either of you.
Senator Sanders, I like you. I admire you. Most of the time, I wish that we had 99 more senators just like you.
And I would, wouldn't I? I'm on the younger end of the likely voter spectrum. I'm male. I'm white. I'm liberal as hell. I'm the kind of voter that you should have a lock on.
But Senator, we have a problem, and it's a big one. When it comes to the specifics surrounding the core issue of your campaign, you have too often come across as either disingenuous or strangely removed from current reality.
The red flags have become too frequent to ignore.
You recently claimed that under your leadership, "the Treasury Department will create a too-big-to fail list of banks and insurance companies."
Of course it will. The Treasury Department has been legally required to do that since the Dodd-Frank Act of 2010. The institutions are, on top of that, already subjected to stress tests, and when they fail, there are fairly serious consequences. The Department's annual report is available right here. You can find a list of these institutions on Wikipedia, for crying out loud. The Financial Stability Board also maintains a global list, which you can find right here, should you find that helpful.
Similarly, you have made a fair amount of noise calling for an independent audit of the Federal Reserve. That's already done, every single year. You can find last year's report right here.
What the plan that you and Sen. Paul have put forth does is, a) pander to low-information voters, and b) make the Federal Reserve's every decision subject to congressional pressure. What you are proposing, Senator Sanders, would set the Fed's independence back four decades and allow Paul Ryan to pressure it at every turn.
Even when I agree with your proposed policies, I am too often alarmed by your extreme departures from reality.
You have proposed, for example, to pay for universal free public college with a tax on Wall Street speculation. Hillary Clinton had previously proposed such a tax, sans the promise that it would cover such a large expense. It's called a Tobin tax. The idea dates back to 1972, and is meant to stabilize markets.
When it comes to raising revenue, however, it's arguably little more than snake oil. Sweden once tried it after the promise of 1.5 billion kronor in new revenue. It fell 97 percent short of that projection. As investors moved to other markets, revenue from capital gains taxes fell. The relatively meager 50 million the tax did bring in was offset entirely by those losses. Recent experiments in Italy and France have been similarly disappointing.
Of course, it should bring in some money -- a good deal, perhaps. Taiwan, Hong Kong, India, South Africa and South Korea currently raise tens of billions (combined, annually,) with the tax. And a group of ten European nations is now hoping that a similar tax might generate as much as $15 billion annually, between them. (Good luck with that, say Italy and France.)
But in 2012, students in the U.S. spent $62.6 billion on tuition at public colleges. In order for your scheme to work, a Tobin tax here would need to raise roughly that plus the cost of students who would return to school or take a public institution over a private one if it were free. It would also have to defray the price paid by seniors, who will end up eating some of the cost... All without being offset by other lost revenue.
Senator, you're not going to pay for universal free public college with a Tobin tax.
But none of this holds a candle to the bizarre narrative you have consistently pushed around Glass-Steagall, your primary point of distinction from Secretary Clinton on finance. You have repeatedly insinuated, implied and said flat-out that the Gramm-Leach-Bliley Act, which you tend to call a repeal of Glass-Steagall, caused the financial crisis.
Senator Sanders, that simply isn't true. That is a lie invented for a slimy attack ad during the 2008 campaign. There is an overwhelming consensus--not from Wall Street, but from watchdogs and academics -- that the repeal of Glass-Steagall did not cause the financial crisis. Fact checker after fact checker after fact checker after fact checker has found the claim to be, at best, an enormous stretch. They were doing so, from all parts of the political spectrum, years before you launched a presidential campaign.
The law had little if anything to do with the practices leading up to the crisis. It aimed, as you well know, to separate commercial from investment banking. You can support that policy or oppose it, with honest, pro-regulatory arguments on either side. I might even agree with you. But you cannot with a straight face blame the financial crisis on its absence.
Princeton's Alan S Blinder wrote way back in 2010:
I often pose the following question to critics who claim that repealing Glass-Steagall was a major cause of the financial crisis: What disasters would have been averted if Glass-Steagall was still on the books?
I've yet to hear a good answer. While mortgage underwriting standards were disgraceful, they were promulgated by banks and mortgage finance companies and did not rely on any new GLB powers. The dodgy MBS were put together and marketed mainly by free-standing investment banks, not by newly created banking-securities conglomerates. All five of the giant investment banks (Goldman Sachs, Merrill Lynch, Morgan Stanley, Lehman Brothers, and Bear Stearns) got themselves into severe trouble without help from banking subsidiaries, and their problems certainly did not stem from conventional investment banking activities--the historic target of Glass-Steagall. Similarly, Wachovia and Washington Mutual died (and Bank of America and Citigroup nearly did) of banking diseases, not from entanglements with or losses imposed on them by related investment banks. In short, I don't see how this crisis would have been any milder if GLB had never passed.
When asked to identify a law that actually contributed to the financial crisis, experts are more likely to point to the Commodity Futures Modernization Act of 2000. TIME Magazine explained back in 2008:
If you had to pick a single government move that did more than any other to muck things up, it was probably this bill, passed by a Republican Congress and signed into law by lame-duck President Bill Clinton in December 2000. It effectively banned regulators from sticking their noses into over-the-counter derivatives like credit default swaps. There's no guarantee that regulators would have sniffed out the dangers in time. But banning them from even looking sent a pretty clear anything-goes message to OTC derivatives markets.
Senator Sanders, you voted in favor of that law.
I'm not saying this to pin the blame on any one law, Senator. Certainly not to pin it on you. That would be absurd. I am merely pointing out that Glass-Steagall is an especially ridiculous boogeyman.
In fact, there is good reason to believe that Glass-Steagall would have made the crisis worse. The kind of combined institutions the law aimed to prevent weathered the financial crisis far better than the kind of independent investment firms it aimed to mandate.
The U.S. overall fared the global disaster relatively well, which itself blows a huge hole in any story seeking to blame it on a single US law. But it is Canada's remarkable endurance that really sinks the Glass-Steagall claim. Canada's relative success has often been attributed in part to Schedule I and II of its Bank Act, which serve as a sort of anti-Glass-Steagall. This gave Canadian institutions "a steady, secure stream of capital," while "holdovers from Glass Steagall" in the US collapsed or were forced to combine.
As Factcheck.org concluded in 2008:
The Gramm-Leach-Bliley Act had little if anything to do with the current crisis. In fact, economists on both sides of the political spectrum have suggested that the act has probably made the crisis less severe than it might otherwise have been...
Deregulated banks were not the major culprits in the current debacle. Bank of America, Citigroup, Wells Fargo and J.P. Morgan Chase have weathered the financial crisis in reasonably good shape, while Bear Stearns collapsed and Lehman Brothers has entered bankruptcy, to name but two of the investment banks which had remained independent despite the repeal of Glass-Steagall.
Observers as diverse as former Clinton Treasury official and current Berkeley economist Brad DeLong and George Mason University's Tyler Cowen, a libertarian, have praised Gramm-Leach-Bliley has having softened the crisis. The deregulation allowed Bank of America and J.P. Morgan Chase to acquire Merrill Lynch and Bear Stearns. And Goldman Sachs and Morgan Stanley have now converted themselves into unified banks to better ride out the storm.
Brookings Institution Fellow Phillip Wallach rather charitably described your efforts to tie Glass-Steagall to the financial crisis as, "Stretching very hard to try to fit a square peg in a round hole," and, "not at all convincing as a matter of accurate historical description."
Sometimes, Senator, you really live up to your initials.
I realize that you're giving people easy answers to complicated problems because they respond to that better than wonky lectures about shadow banking. I am fully aware that three quarters of all readers checked out of this piece somewhere around the Tobin tax.
The problem is that you're talking to people who sense that something is wrong, are angry about it and want to know where to place the blame. You are giving them a cabal of boogeyman bankers, corporations and allegedly bought politicians to bear the brunt of that resentment. You're doing this through a fair degree of dishonesty, and the response of your supporters and campaign to any kind of reality check has thus far been to impugn the motives of impartial observers.
Bernie -- do you mind if I call you Bernie? That's bullshit, Bernie.
Senator, you are forming a mob of angry, misinformed people and then turning it on the likely Democratic nominee. That, Senator, is a dangerous and destructive game. Does your campaign honestly wonder why it has become synonymous with nasty online invective? If you mention the Bernie Bros online, fifty people fitting the profile pop up with abusive comments informing you that they don't exist. On the eve of the Nevada caucus, one of your supporters attempted to place an obituary for Secretary Clinton in the Las Vegas Sun-Journal. Don't you think this all might have a little something to do with your "me against the corrupt establishment" bluster?
It is a bitter irony, then, that Paul Krugman, Barney Frank, Gary Gensler, Jared Bernstein and Felicia Wong and Mike Konczal of the Roosevelt Institute all agree that Clinton's plans to rein in Wall Street have more teeth than yours.
Meanwhile, anyone hoping to back up your claims will almost certainly be directed to your surrogate Robert Reich--whose website currently sports thirty-nine "above fold" links to purchase books targeted at leftist consumers. Your campaign is built on questioning the motives of the people who aren't trying to sell your supporters anything, Senator, while simultaneously directing them toward someone who is.
A group of progressive economists recently wrote that outlandish claims of economic expansion under your proposed plans, "undermine the credibility of the progressive economic agenda and make it that much more difficult to challenge the unrealistic claims made by Republican candidates."
Did you look at the signatures on that letter, Senator? Did you notice that half of them work at the same University as Robert Reich?
To be clear: I am not questioning Reich's sincerity. I am, however, pointing out how ridiculous it is, given the circumstances, for your campaign to behave as if the only honest, informed economists in the world are the ones acting as your surrogates.
Senator, I'm not an economist. But I know when someone is spouting nonsense because they think it's what I want to hear. If you want to know how that story ends, just take a look at the current Republican field.
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