MORE THAN anything else, Sen. Bernie Sanders (I-Vt.) has based his campaign on attacking Wall Street — the millionaires and billionaires who, by his telling, wrecked the U.S. economy, dominate the political system and must be brought to heel. Given his commitment to the message, you might expect he would have some familiarity with the policy details and implications.
A New York Daily News editorial board interview with the candidate proved otherwise. The senator seemed to have no idea of what reformed banks should look like, or whether he would need new legislation, even though the government under his presidency would play a central role in tearing apart these complex financial institutions.
Mr. Sanders followed the interview with what was meant to be a clarifying statement. The treasury secretary would draw up a list of too-big-to-fail banks, Mr. Sanders explained, and break them up under the authority of the Dodd-Frank financial reform law. In an interview with us, Sanders policy adviser Warren Gunnels said that current regulators are not applying existing authorities aggressively enough and that Mr. Sanders would pick a strong treasury secretary with no Wall Street ties to fill in many of the details.
It’s astonishing that, on this of all issues, the campaign would need to issue a what-the-candidate-meant-to-say statement. Even then, the campaign has left a lot of essential questions unanswered.
Here’s one: What is breaking up the banks meant to accomplish?
From what Mr. Sanders and his campaign have said, you could posit several possibilities: protecting taxpayers, safeguarding the financial system, making the financial sector less concentrated and reducing the financial sector’s share of the total economy. Explaining that he wants to do all of these things is not sufficient, because policies differ depending on which goal you prioritize. Regulators working under Dodd-Frank, for example, have gone a long way to addressing the first two issues without breaking up banks, a step that many experts warn may not be worth the costs. If banking-sector concentration is Mr. Sanders’s concern, then he should explain why addressing it would justify those costs; after all, countries such as Canada have more concentrated banking systems and yet weathered the financial crisis much better. If, on the other hand, Mr. Sanders wants to shrink the overall financial sector, he must explain how breaking up a few banks into a larger number of medium-size banks would contribute.
Many voters share Mr. Sanders’s disdain for high finance and his nostalgia for an economy based more on manufacturing. But such prejudices, whether sound or not, provide an insufficient basis for remaking the world’s largest economy. Former secretary of state Hillary Clinton has a banking-sector reform proposal designed to address the highest risks to the financial system that remain after the first round of reform. Mr. Sanders has yet to furnish anything of equivalent rigor. We hope he provides more clarity in next week’s Democratic debate.