“The proposal that I have put forth about how we rein in the excesses of Wall Street, so we never again face what we did in 2008, has been judged as being more comprehensive, tougher, more effective by Barney Frank, by Sherrod Brown, my friend from Ohio who leads the banking efforts in the Senate, and by Paul Krugman. So, I have a plan that will go after not just the big banks, because Dodd-Frank has given us the tools to do a lot of that, but to go after the so-called shadow-banking industry.”
— Former secretary of state Hillary Clinton, interview on CBS’s “Face the Nation,” Jan. 10, 2016
“I think I have a broader, more comprehensive set of policies about everything, including taking on Wall Street…. Everybody who’s looked at my proposals says my proposals are tougher, more effective, more comprehensive. Because, yeah, I take on the banks, but remember, part of what caused the mess we had in ’07-’08 were not the big banks. It was Lehman Brothers. It was Bear Stearns. It was AIG, the giant insurance company. I want to go after everybody who poses a risk to our financial system.”
— Clinton, speech in Sioux City, Iowa, Jan. 5, 2016
As the saying goes: Never say never, and never say always. It’s a good rule for journalists to avoid absolutes, and the same applies to politicians — when you attribute things to everybody or nobody, you’re bound to be fact-checked.
The Fact Checker was asked about the sweeping statement in Clinton’s speech in Sioux City that “everybody who’s looked at my proposals says my proposals are tougher, more effective, more comprehensive” than Democratic presidential candidate Sen. Bernie Sanders’s (Vt.). Taken literally, finding one person who disagrees with her proposal would automatically debunk her claim. But then, in an interview on “Face the Nation,” Clinton spoke more specifically about who exactly supported her plan. (We recently awarded Four Pinocchios for another broad statement by Clinton, that she was the only candidate who wouldn’t raise middle-class taxes.)
Clinton released her Wall Street proposals in October, and Sanders released his the first week of January. It is beyond the Fact Checker’s purview to make a judgment call on whose plan is better; readers who want to indulge in the wonkery can read the two plans and draw their own conclusions.
But who said what about Clinton’s Wall Street proposals?
Among the main differences between the two candidates’ plans, Sanders has focused on breaking up big banks and reinstating a modern Glass-Steagall Act to separate investment from commercial banking. Clinton has not embraced this idea, saying she does not think it’s necessary.
Clinton has focused on stricter enforcement of financial regulations, strengthening aspects of the Dodd-Frank Act (in particular, the “Volcker rule,” which bans commercial banks from making risky trading bets) and imposing risk fees on the largest financial institutions.
Not all expert analyses are created equal; a tweet from a columnist is different than a detailed op-ed picking apart portions of a plan. We checked out the list of expert reactions from the Clinton and Sanders campaigns and separated them into categories: PhD economists, government officials, think tank and industry leaders, academics, and media reports. Clearly, the list is not exhaustive.
Supporters of Clinton’s proposal
- Paul Krugman: “Mr. Sanders has been focused on restoring Glass-Steagall, the rule that separated deposit-taking banks from riskier wheeling and dealing. And repealing Glass-Steagall was indeed a mistake. But it’s not what caused the financial crisis, which arose instead from ‘shadow banks’ like Lehman Brothers, which don’t take deposits but can nonetheless wreak havoc when they fail. Mrs. Clinton has laid out a plan to rein in shadow banks; so far, Mr. Sanders hasn’t.”
Government and political officials (current and former)
- Jared Bernstein, former economic adviser to Vice President Biden: “These are non-trivial improvements in Dodd-Frank — by closing Volcker Rule loopholes and by significantly boosting individual accountability,” Bernstein said, according to a Bloomberg News article provided by the campaign. Bernstein added that he thinks that Clinton’s plan “has the potential to prevent the kind of excesses that got us into so much trouble” but that Clinton’s transaction tax is “far too narrow” and “doesn’t go far enough.” He added, “My view is that a small transaction tax with a much broader base would do much more.”
- Sen. Sherrod Brown (D-Ohio), ranking Democratic member on the Senate Banking Committee: The above Bloomberg News article also quotes Brown as calling her plan “a pretty good start,” but he declined to comment on Sanders’s plan. “I don’t know if anything goes far enough. I think it makes sense. The things she does will contribute to safety and soundness, will make Wall Street more trustable by the public,” he said. “All the things that we need out of Wall Street, it does.” Brown, we should note, has endorsed Clinton.
- Gary Gensler, former chairman of the Commodity Futures Trading Commission: The campaign provided this statement by Gensler, who is now the chief financial officer for the Clinton campaign and helped craft her plan. “We are pleased to see that Senator Sanders is finally talking about the importance of dealing with risks posed by activities in the shadow banking system. Unfortunately, however, he failed to put forward a single new proposal that addresses those risks. We already knew that Senator Sanders wants to break apart financial institutions. What we haven’t seen is his plan to deal with the risky shadow banking activities that brought our economy to the brink of collapse in 2008. By contrast, a wide range of progressive experts has acknowledged that Secretary Clinton’s Wall Street plan is the most serious and comprehensive in this campaign.”
- Former congressman Barney Frank (D-Mass.), one of the authors of Dodd-Frank: Frank was cited in a Huffington Post article saying that Clinton’s high-frequency trading tax is a “good idea” and “makes sense.” Frank advised Clinton on drafting the plan.
Think tank and industry representatives
- Roosevelt Institute President Felicia Wong: “Secretary Clinton released a detailed and comprehensive agenda today and her proposals to strengthen Dodd-Frank and the Volcker rule, step up enforcement, and increase rules around shadow banking and high-frequency trading demonstrate a thoughtful and serious approach to these issues.”
- Roosevelt Institute’s Mike Konczal: Konczal praised Clinton’s plan based on a rubric set by Sen. Elizabeth Warren (D-Mass.) but said Sanders’s plan more closely meets two of Warren’s five criteria.
- Gary Sernovitz, managing director at the private equity firm Lime Rock Partners: “If you agree with the Democrats that Wall Street should be reformed, though, Clinton’s more comprehensive solution better grasps the world of finance today. Not only are Sanders’s bogeybanks just one part of Wall Street but they are getting less powerful and less problematic by the year. ‘It ain’t complicated,’ Sanders said during the debate. But Clinton is right: it is.”
Supporters of Sanders’s proposal or experts critical of Clinton’s
- Dean Baker: “Sanders FTT [financial transactions tax] would almost certainly do more to change behavior on Wall Street than everything that Clinton has proposed taken together, by a rather large margin. Leaving out the FTT in this comparison is sort of like evaluating the New England Patriots’ Super Bowl prospects without discussing their quarterback.”
- The Sanders campaign released a letter signed by 60 academics in economics and beyond, in support of Sanders’s plan over Clinton’s. The letter was signed by Baker, James Galbraith, Robert Reich, Robert Hockett of Cornell University and 56 others. It reads:
In our view, Senator Sanders’ plan for comprehensive financial reform is critical for avoiding another “too-big-to-fail” financial crisis. The Senator is correct that the biggest banks must be broken up and that a new 21st Century Glass-Steagall Act, separating investment from commercial banking, must be enacted.
Wall Street’s largest banks are now far bigger than they were before the crisis, and they still have every incentive to take excessive risks. No major Wall Street executive has been indicted for the fraudulent behavior that led up to the 2008 crash, and fines imposed on the banks have been only a fraction of the banks’ potential gains. In addition, the banks and their lobbyists have succeeded in watering down the Dodd-Frank reform legislation, and the financial institutions that pose the greatest risk to our economy have still not devised sufficient “living wills” for winding down their operations in the event of another crisis.
Secretary Hillary Clinton’s more modest proposals do not go far enough. They call for a bit more oversight and a few new charges on shadow banking activity, but they leave intact the titanic financial conglomerates that practice most shadow banking. As a result, her plan does not adequately reduce the serious risks our financial system poses to the American economy and to individual Americans. Given the size and political power of Wall Street, her proposals would only invite more dilution and finagle.
The only way to contain Wall Street’s excesses is with reforms sufficiently bold and public they can’t be watered down. That’s why we support Senator Sanders’s plans for busting up the biggest banks and resurrecting a modernized version of Glass-Steagall. [Update: The letter is now signed by 170 academics.]
Government and political officials (current and former)
- Robert Reich, former labor secretary under President Bill Clinton: “Bernie Sanders is giving a major speech on Wall Street today in which he commits to busting up the biggest banks and reinstating the Glass-Steagall Act. Both of these steps are necessary to avoid another ‘too-big-to-fail’ bailout, along with another crisis that robs millions of Americans of their jobs, homes, and savings. I still don’t understand why Hillary Clinton won’t take these steps. She wants to charge the biggest banks a bit more and oversee them more carefully. But her proposals would only invite more dilution and finagle. The only way to contain the Street’s excesses is with reforms so big, bold, and public they can’t be watered down — busting up the biggest banks and resurrecting Glass-Steagall.”
- Neil Sroka, spokesman for progressive group Democracy For America: “While the details we’ve seen of Sec. Hillary Clinton’s Wall Street accountability plan appears to demonstrate a genuine commitment to ensuring criminals on Wall Street aren’t treated differently than criminals on Main Street, her continued rejection of a new Glass-Steagall is troubling.”
Think tank and industry representatives
- Camden Fine, president of Independent Community Bankers of America: The Morning Consult reported Fine calling Clinton’s stance on regulating larger Wall Street banks as politicking. Fine said in a statement to the Fact Checker: “ICBA supports a 21st century version of Glass Steagall. It would need to be updated to reflect changes in how the financial world functions today. It would be accurate to say that ICBA supports FDIC Vice Chairman Tom Hoenig’s version of the re-in statement of Glass Steagall. As for Bernie’s broader vision of financial services reform, ICBA does not support broad portions of it. But specifically on the reinstatement of some form of Glass Steagall and on breaking up the biggest banks, we are sympathetic to his statements.”
- Dennis Kelleher, president of financial reform advocacy group Better Markets: Kelleher was quoted in a Politico article saying he has concerns about some parts of Clinton’s plan, but there is no indication he has endorsed one plan over another.
In addition, both campaigns provided supportive comments made by other academics who are not in economics. The Clinton campaign pointed to a supportive column by Brandon Garrett, a University of Virginia law professor. The Sanders campaign also pointed to James Kwak, a law professor at the University of Connecticut School of Law, in addition to the academics listed in the letter above.
Both campaigns also cited media reports, though not every report was directly comparing the two plans. Clinton’s campaign sent favorable reports by Vox (from January 2016 and October 2015), MSNBC, Huffington Post and Politico. Sanders’s campaign noted reports that were mostly critical of Clinton’s plan, by Politico, Salon, the Nation, the Huffington Post and Rolling Stone.
It’s important to note that Clinton formally released her Wall Street plan nearly three months before Sanders released his full Wall Street plan, and the majority of the references sent from both campaigns are from October 2015, when Clinton released her plan. So by the nature of timing, Clinton had a more comprehensive and detailed plan until Sanders’s was released. But a Clinton campaign spokesman said: “Her plan being tougher, more effective and more comprehensive isn’t about timing, it’s about the substance.”
The Pinocchio Test
We are not going to referee this battle of the experts — especially when many of the comments made for or against Clinton’s plan were done before Sanders’s was fully rolled out. In the Iowa speech, Clinton made an extremely sweeping statement that “everybody” who studied her proposal found it “tougher, more effective, more comprehensive” than Sanders’s — and we warn Clinton against making such a broad-brushed, hyperbolic comment.
In a subsequent interview, Clinton more specifically noted that Barney Frank, Paul Krugman and Sherrod Brown found her plan tougher, more effective and more comprehensive. A review of their statements shows they support Clinton’s plan. But Brown called it a “pretty good start,” a more modest praise for her plan than she makes it sound. Further, Frank advised her on drafting the plan.
A review of other experts provided by both campaigns shows that Clinton has gotten support from a range of PhD economists, former and current government officials, and industry and think tank representatives. But the review also shows some pointed criticism of her plan from a range of those experts. Meanwhile, the Sanders campaign has now compiled its own list of experts, backing his plan over Clinton’s. Clinton’s exaggeration of the positive endorsements for her Wall Street plan earns her Two Pinocchios.
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