Sen. Bernie Sanders, I-Vt., wants to break up some of the world’s biggest financial institutions into smaller entities — a move unlikely to get much traction in Congress, but one that could help frame a flattering contrast between Sanders and his rival for the Democratic presidential nod, Hillary Clinton.
On Wednesday, the ranking minority member of the Senate Budget Committee and Democratic presidential candidate joined with Rep. Brad Sherman, D-Calif., to unveil legislation aimed at pulling apart “too big to fail” banks.
The Too Big to Fail, Too Big to Exist Act directs the Treasury Department’s Financial Stability Oversight Council to create a list of financial institutions “whose failure would serve a catastrophic risk to the United States economy without a bailout,” said Sanders during a Wednesday press conference. The Treasury Secretary would then have one year to break up those entities on the list into separate businesses that would be small enough to collapse without posing a systemic risk to the rest of the economy.
“If any of these financial institutions were to fail again, the taxpayers of this country would be on the hook for another bailout, perhaps even larger than the last,” said Sanders. “We must not allow that to happen. No single financial institution should be so large that its failure would cause catastrophic risk to millions of Americans or to our nation’s wellbeing."
Sanders and Sherman have introduced similar legislation on two prior occasions, with little success. The odds of passage have not improved this time around, given that Republicans now hold the majority in both the House and the Senate. However, reintroducing the bill does give Sanders an opportunity to draw a contrast between himself and Clinton, the front-runner in the 2016 Democratic primary.
Although Clinton has tacked left on major liberal priorities such as immigration in the early weeks of her candidacy, many progressives have expressed unease with her perceived ties to Wall Street. Such concern has been one of the primary motivators behind the campaign to draft Elizabeth Warren into the Democratic primary, as Warren has built her legislative career around vigorously opposing the influence of large financial institutions. But Sanders has also been fairly aggressive when it comes to regulating Wall Street, something that he emphasized during Wednesday’s press conference.
“I was one of the leading opponents of the efforts of Alan Greenspan, Robert Rubin, and Larry Summers, who all told us how wonderful it would be if we deregulated Wall Street back in the 1990s,” he said.
Greenspan, chairman of the Federal Reserve from 1987 until 2006, was a Ronald Reagan appointee; Sanders left unmentioned that Rubin and Summers both served as Treasury Secretary under President Bill Clinton, Hillary Clinton’s husband. But he made the critique more explicitly in a May 1 interview with the Washington Post.
“I’ve known Hillary for 25 years, and I like and respect Hillary. I think it is fair to say that when the industry was deregulated by Robert Rubin, Larry Summers, Alan Greenspan during the Clinton administration, and the Secretary has received a lot of support from Wall Street, I think it is fair to say there might be a tendency to be less than vigorous in standing up to their incredible wealth and power,” he told the Post.
A spokesman for the Clinton campaign declined to comment regarding whether the candidate supports breaking up “too big to fail” institutions.
When a reporter at Wednesday's press conference asked about Hillary Clinton and the 2016 primary, Sanders waved the question away, saying, “I’m not here to talk about Hillary Clinton. You want to ask Hillary Clinton about these issues, obviously feel free."