Elizabeth Warren hasn’t endorsed a Democratic candidate for president yet.
But that didn’t stop Bernie Sanders from invoking the Massachusetts senator’s name to ding Hillary Clinton during a speech Tuesday in New York, in which he released his Wall Street reform plan.
Sanders said that as president he would first break up “too-big-to-fail’’ banks as he says is authorized under a section of the 2010 Dodd-Frank Act, which says the Federal Reserve can break up large banking or financial institutions that pose “a grave threat to the financial stability of the United States.’’
Sanders said he would then fight for “a 21st Century Glass-Steagall Act,’’ as Warren recently proposed.
“Let’s be clear: this legislation, introduced by my colleague Senator Elizabeth Warren, aims at the heart of the shadow banking system,’’ the Vermont senator said. “In my view, Senator Warren, is right. Dodd-Frank should have broken up Citigroup and other ‘too- big-to-fail’ banks into pieces. And that’s exactly what we need to do. And that’s what I commit to do as president.’’
The reinstatement of Glass-Steagall — a Depression-era law, repealed under President Bill Clinton in 1999, that mandated the separation of commercial and investment banking — is a point of contrast between Clinton and Sanders when it comes to reforming Wall Street.
After getting a shout-out from Sanders in Tuesday’s speech, Warren showed her support for the Vermont senator’s plan in a Facebook post Wednesday morning.
“I’m glad Bernie Sanders is out there fighting to hold the big banks accountable, to make our economy safer, and to stop the Republicans from rigging the system even more in Wall Street’s favor,’’ she wrote. “We need to level the playing field and end too big to fail.’’
Clinton, however, has said that Glass-Steagall would not have stopped the recent financial crisis, pointing to “reckless behavior’’ by nontraditional banks and actions in the “shadow banking’’ sector.
My plan would strengthen oversight of these activities, too — increasing leverage and liquidity requirements for broker-dealers and imposing strict margin requirements on the kinds of short-term borrowing that also played a major role in spurring the financial crisis.
But Sanders rebutted that position Tuesday, saying that his plan addresses shadow banks as well:
Secretary Clinton says that Glass-Steagall would not have prevented the financial crisis because shadow banks like AIG and Lehman Brothers, not big commercial banks, were the real culprits.
Secretary Clinton is wrong.
Shadow banks did gamble recklessly, but where did that money come from? It came from the federally-insured bank deposits of big commercial banks – something that would have been banned under the Glass-Steagall Act.
Let’s not forget: President Franklin Roosevelt signed this bill into law precisely to prevent Wall Street speculators from causing another Great Depression. And, it worked for more than five decades until Wall Street watered it down under President Reagan and killed it under President Clinton.
The Vermont senator also gave some of his harshest criticism of Clinton to date in the speech.
“Secretary Clinton says we just need to impose a few more fees and regulations on the financial industry. I disagree,’’he said, going on to quote former Secretary of Labor Robert Reich, who said “Clinton’s proposals would only invite more dilution and finagle’’ to the banking industry.
Sanders also implicitly criticized Clinton for her ties to financial industry, referring to the hundreds of thousands of dollars she has made from taking speaking fees from Wall Street.
“Yes. Wall Street has enormous economic and political power,’’ Sanders said. “Yes. Wall Street makes huge campaign contributions, they have thousands of lobbyists and they provide very generous speaking fees to those who go before them.’’