Bernie Sanders gave an interview to the editorial board of New York Daily News last week in which he laid out his plan for reforming Wall Street. He has taken criticism from all around in the past few days for his answers, which many readers felt were vague.
Writers for The Atlantic, Vanity Fair, CNN, Slate and Talking Points Memo as well as The Washington Post concluded that Sanders had botched the interview, and that he wasn't prepared to answer important practical and logistical questions about his policies.
For example, Sanders was faulted for not having formed an opinion on a recent ruling in federal court. "It’s something I have not studied, honestly," he said.
A closer look at the transcript shows that Sanders's conversation with the Daily News was more nuanced than some of the criticism might suggest. That federal court ruling, for instance, remains under seal, and experts on the financial sector said there were additional reasons that Sanders couldn't give precise answers to several of the questions that were put to him.
Some aspects of the debate over banking reform remain uncertain simply due to the complexity of managing Wall Street -- a responsibility shared by corporations, judges and federal agencies. At moments when the discussion became especially technical, it seemed that both Sanders and his interviewers didn't completely understand each other.
"It's not that he doesn't have policy knowledge," said Avik Roy, who has advised former GOP presidential candidates Rick Perry, Sen. Marco Rubio (R-Fla.) and Mitt Romney.
"As an economist, sure, I'd love to see him spell everything out," said Dean Baker, a director of the liberal Center for Economic and Policy Research in Washington. "Did he give reasonable answers that gave people a reasonable idea of what he would do? Yeah. I didn't see any big scandal there."
How to break up the banks
When it comes to breaking up the banks, reformers have put forward several approaches.
One would be for a president to ask Congress for new laws that would force banks to reduce their size. For example, Congress might place a limit or a tax on banks' total liabilities, as Hillary Clinton, Sanders's rival for the Democratic presidential nomination, has proposed.
Perry, the former governor of Texas, put forward another idea. Lawmakers could also impose stricter requirements on banks of a certain size, forcing them to stockpile their profits as a kind of insurance policy against a crisis. Requirements of this kind reward banks that remain small, while forcing larger banks to be prepared to bail themselves out instead of relying on taxpayers. The Federal Reserve has already put in place some rules along these lines, but Congress could reinforce them.
Since Congress isn't likely to act, another approach would be for the president to appoint subordinates who would use the authority that Congress granted them in the past to order the banks to divest. A group of regulators directed by the Treasury secretary has this authority under the Dodd-Frank financial reform law.
Sanders alluded to both possible approaches in his conversation with the Daily News, according to a transcript of the interview.
"How do you go about doing it?" the senator was asked.
"How you go about doing it is having legislation passed," he replied, "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."
While some commentators apparently took this response to indicate that Sanders hadn't thought his plan all the way through, it is also possible that he has considered more than one option if he wins the general election, depending on whether Congress is willing to work with him.
In any case, when the Daily News pressed him, he gave an unambiguous answer.
"How?" Sanders was asked. "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?' "
"Well, you do have authority under the Dodd-Frank legislation to do that, make that determination," Sanders explained.
The interviewer's next question seemed to conflate two separate sources of authority -- the Treasury Department and the nation's central bank. "You do, just by Federal Reserve fiat, you do?" Sanders was asked.
While the Federal Reserve also arguably has the power to force banks to dissolve, the central bank would probably need the consent of the Federal Deposit Insurance Corporation in this regard, and would operate with a legal authority distinct from the Treasury secretary's.
"Yeah. Well, I believe you do," Sanders replied -- a confusing answer to a confusing question that nonetheless also drew criticism from the press.
I'll be home for Christmas
The discussion by the editorial board of the Daily News and by other journalists, also could have given the mistaken impression that Sanders wants to place the banks under the direct control of the federal government.
Advocates of banking reform in both parties do not argue that the government should give specific instructions to employees and managers at banks about how to reduce the size of their firms, regardless of the legal technique used to break them up. Instead, Uncle Sam would place broad requirements on the banks, leaving the details of meeting those requirements up to the people on Wall Street.
"We don't want the government running the banks," said Baker, who published a short analysis of the interview in the Daily News online. "We want the government saying you can't be above a certain size -- whatever that might be -- but the banks know how best to organize themselves so as to be as efficient as possible."
Other federal regulations function similarly. Regulators require seat belts in cars, but they don't tell automakers how to manufacture them. They place limits on pollution, but they don't draw up blueprints for power plants.
"If my mom says I have to come home for Christmas, she does not say, 'You have to take this train,' or 'You have to take this flight,' or 'You have to drive,' " said Mike Konczal, an expert on Wall Street at the liberal Roosevelt Institute. "She leaves it to me to figure out the most efficient and effective way to get there." (Konczal, an occasional contributor to Wonkblog, also put his thoughts about the interview online.)
In the interview, the board of the Daily News asked detailed questions about how Sanders would manage the financial sector.
"If you look at JPMorgan just as an example, or you can do Citibank, or Bank of America, what would it be? What would that institution be? Would there be a consumer bank? Where would the investing go?"
"I'm not running JPMorgan Chase or Citibank," Sanders answered.
"No. But you'd be breaking it up."
"That's right. And that is their decision as to what they want to do and how they want to reconfigure themselves. That's not my decision," Sanders said. Some interpreted this response as a dodge, including Sanders's interviewer at the Daily News.
"I'm a little bit confused," the conversation continued, "because just a few minutes ago you said the U.S. president would have authority to order..."
"No, I did not say we would order," Sanders replied, emphasizing the limits of presidential authority over the ins and outs of corporate management. "I did not say that we would order. The president is not a dictator."
"Okay. You would then leave it to JPMorgan Chase or the others to figure out how to break it, themselves up. I'm not quite..."
"You would determine is that, if a bank is too big to fail, it is too big to exist," Sanders said.
See you in court
Next, Sanders was asked about a federal court's recent ruling against regulators in favor of MetLife, which could limit the next president's authority over Wall Street.
"It's something I have not studied, honestly, the legal implications of that," Sanders answered when asked about the ruling. Sanders was criticized for this remark as well. Yet instead of apologizing, Konczal said, Sanders might have simply pointed out that the decision remains under seal, so the legal implications remain unknown.
Finally, Sanders was asked about his argument for more aggressively prosecuting bankers involved in the financial crisis.
"Do you have a sense that there is a particular statute or statutes that a prosecutor could have or should have invoked to bring indictments?" the senator was asked.
"I suspect that there are. Yes," he said.
"You believe that? But do you know?"
Sanders couldn't answer that question, but he did argue that the federal law enforcement should devote more manpower to investigating the largest financial firms to determine whether any particular laws were violated. Likewise, Clinton has called for federal prosecutors to crack down on Wall Street, and her plan has won plaudits from many commentators on the left.
The Obama administration, though, has largely chosen to accept hefty payments from banks to settle cases, rather than gathering evidence and bringing it into court. The administration's critics say that the chance that investigations would prove unsuccessful has deterred Obama's deputies from pursuing a more aggressive but riskier strategy, like what Sanders and Clinton are proposing.
Clinton joined in the criticism of Sanders's interview. "If you're concerned about income inequality and holding the banks accountable, you have to know how it works and what you have to do to make it work," she told CNN Wednesday.
'How do you ride the subway?'
Wall Street experts took issue with several planks in Sanders's platform. Konczal noted that Sanders's promise to dissolve the largest financial institutions within a year is simply unrealistic -- it would take him several years, at least, to put the personnel in place to carry out his plans.
Roy, Perry's adviser, excoriated Sanders's proposal to impose a tax on sales of stock and other securities -- which would be a major burden on Wall Street, but which was not discussed in the interview with the Daily News.
"Sanders's overall concern about our banking system is a very justified one, but it's hard for me to see how his policies would have solved the problem," said Roy, who is now at the Manhattan Institute, a conservative research organization.
"It's far from obvious that taxing the banks more is going to change the incentives in banking that led to a financial crisis or that might cause a financial crisis in the future," he added, faulting Sanders for what he called a "simplistic worldview."
There was one question that Sanders clearly flubbed. Here's that exchange, which started when the editorial board asked the native of Brooklyn about his relationship with New York, where Democrats will go to the polls in the primary in two weeks:
Sanders: I know how to ride the subways. I’ve been on them once or twice.
Daily News: Do you really? Do you really? How do you ride the subway today?
Sanders: What do you mean, "How do you ride the subway?"
Daily News: How do you get on the subway today?
Sanders: You get a token and you get in.
Daily News: Wrong.
Sanders: You jump over the turnstile.
The good news for Sanders is that riding the subway in New York isn't nearly as complicated as preventing the next financial crisis.