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Bernie Sanders Lays Out His Plan for Sweeping Financial Reform

No bank should be too big to fail, he said.

Via Wikimedia Commons user AFGE

In a fiery speech on Tuesday in New York City—not far from Wall Street—Democratic presidential candidate Bernie Sanders laid out his plan for sweeping financial reform. Sanders’ speech firmly targeted the nation’s wealthiest 1 percent: “Our goal must be to create a financial system and an economy that works for all Americans, not just a handful of billionaires,” he said.

Here are the big policy points in his speech:

Break up the big banks

No bank should be too big to fail, Sanders argued, while pointing out that America’s six largest banks are now even larger than they were before the 2008 housing crisis—and the taxpayer bailout that followed. The Vermont senator said he would direct the secretary of the Treasury Department to create a list of “too big to fail” banks in the first 100 days of his presidency and then break up those institutions within the first year.

Limit “usurious” fees

It is “unacceptable,” Sanders said, that some Americans pay $4 to $5 ATM fees and 20 to 30 percent interest rates on credit cards. “The Bible has a term for this practice,” Sanders said. “It’s called usury.”

A President Sanders, he said, would cap credit card interest rates at 15 percent, and ATM fees at $2.

Get the foxes out of the henhouse, and bankers out of regulatory bodies

Sanders said he would make the Federal Reserve, the country’s central banking system, more responsive to the needs of the average American, rather than just those on Wall Street. To that end, the candidate said he would end the role banking executives play in the Federal Reserve: sometimes serving on the boards of the nation’s Federal Reserve banks even as their institutions are regulated (and sanctioned) by it.

In a Sanders administration, “the foxes will no longer be guarding the henhouse at the Fed,” the candidate said.

Pivot toward postal banking

Some of the country’s poorest citizens don’t have access to banking services and are forced to regularly take out payday loans, for which some large banks charge consumers as much as 300 percent interest. Sanders has another idea: He wants to create a postal banking system, which would add some banking powers to existing U.S. post offices. The proposal would see post offices cash checks, hold savings accounts, and provide small lending services.

Bring back Glass-Steagall

Sanders vowed to instate a “21st Century Glass-Steagall Act,” bringing back the banking legislation created by Franklin Roosevelt just after the Great Depression but repealed under Bill Clinton in 1999. The law effectively drew a line between “Main Street banks” and “Wall Street banks”—institutions that made small business and personal loans and did mortgages, and institutions that bought and sold stocks and bonds and helped large firms merge and acquire other large firms.

Some believe the repeal of Glass-Steagall created the conditions for 2008’s financial meltdown. This camp includes Bernie Sanders. Others say “shadow banks”—hedge funds and insurance companies—were more responsible for the crisis, and that Glass-Steagall would not have prevented it from happening.

Critically, this policy argument creates a wide gulf between Sanders and his main opponent, Democratic presidential candidate and former Secretary of State Hillary Clinton. She argues that regulators should focus on “shadow banks” instead of the big banks targeted by Glass-Steagall.

Senator Sanders and Secretary Clinton during October’s Democratic debate. Image via YouTube screen capture.

As Mehrsa Baradaran, a law professor at the University of Georgia, told The Atlantic, “There’s not much a president can do for some of these things.” A President Sanders would need a willing Congress to enact many of these policies, and that’s something he’s unlikely to get.

Still, Sanders used his speech Tuesday to put Wall Street on notice. “Greed is not good,” he said. “In fact, the greed of Wall Street and corporate America is destroying the fabric of our nation. And, here is a New Year’s Resolution that I will keep if elected president. If you do not end your greed, we will end it for you.”

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