Vermont’s Sen. Bernie Sanders warned us for years what would happen if the financial industry was deregulated. By allowing banks to merge with insurance companies and opening the door for the creation of new financial products, speculation ran wild.
As a result of what Sanders called a "casino gambling mentality," large financial institutions almost drove the U.S. and world economies into ruin.
In an interview this week with the Bennington Banner, Sanders said he intends to play an active role in the upcoming Senate debate on financial regulatory reform.
"The average American is profoundly disgusted at the behavior of Wall Street," said Sanders. "By allowing these guys to do almost anything they wanted to do, their greed became just incredible. What we need to do is have Wall Street and our financial institutions investing in the real economy, the productive economy."
To do this, Sanders said Congress must act to reintegrate financial institutions back into "the real economy." He believes that any reform must contain four key elements.
-- It must break up "huge" banks. Sanders said the four largest U.S. banks -- Bank of America, Citigroup, JPMorgan Chase and Wells-Fargo -- control a combined $7.4 trillion in assets. The four banks have issued about two-thirds of all credit cards in America, have written half of the mortgages and control nearly 40 percent of bank deposits in the United Sates.
-- It must end illegal banking practices. Today, big banks make most of their money from securities trades and derivatives deals. They have very little incentive to promote economic well-being for everyday citizens. Sanders wants to prevent banks from engaging in securities trades, and make sure all derivatives transactions are conducted on open, transparent exchanges, just as ordinary stocks and bonds are.
-- It must restore transparency to the Federal Reserve Bank. Sanders said that large financial institutions received trillions of dollars in near-zero interest loans from the Fed, but the Fed refuses to disclose where the taxpayer money was loaned and how it ended up being used. "It’s time we had transparency at the Fed," Sanders said.
-- It must cap credit card interest rates. Credit card companies are still charging interest rates of 30 percent or more, even for customers who pay on time. "Usury is immoral, you cannot charge people outrageously high interest rates," Sanders said. He is seeking an amendment to the financial reform package that will cap credit card interest rates at 15 percent, as federal law mandates for credit unions.
These are all sensible and much needed reforms, but Sanders admits they will be difficult to pass. The financial industry is far and away the biggest lobbying force on Capitol Hill, pouring more than $300 million into lobbyists and campaign contributions in 2009. They are on pace to shatter that figure this year.
"All of these issues are going to be very tough, because Wall Street and their friends are spending unbelievable sums of money," Sanders said.
As The Nation’s Washington reporter, John Nichols, wrote this week, the financial industry "is currently defined by a toxic combination of blind greed, unsustainable speculation and ‘too-big-to-fail’ threats not just to the economy, but to the stability of this country’s democratic experiment."
If the Senate fails to rein in the big banks, the payday lenders, the credit card sharks and the Federal Reserve, a tremendous opportunity to save not just our economy, but our democracy, will have been wasted.