As Dean Baker and several (mostly) alternative-media and hobbyist bloggers—including actual experts on Dodd-Frank and on financial-institution governance—have noted since the New York Daily News editorial board released a transcript last Tuesday of its interview with Bernie Sanders, it was not Sanders but instead members of that editorial board who were deeply confused about what Dodd-Frank actually provides. Specifically, about whether that law grant’s the federal government authority to determine that a financial institution is so large that its sheer size poses a systemic risk to this country’s economy.
And also specifically, about whether experts within the finance industry and the Treasury Dept., and economists, think the method of any such government-mandated paring down of a financial institution—absent enactment of the Glass-Steagall-like law—should be devised by Treasury of the Fed of instead by the financial institutions themselves.
And also about whether none other than Hillary Clinton, their candidate of choice, had said during this campaign something along the lines of:
We now have power under the Dodd-Frank legislation to break up banks. And I’ve said I will use that power if they pose a systemic risk.
Which, it has been pointed out since now since Wednesday when Clinton joined the chorus of those saying that Sanders in that interview had demonstrated a lack of basic knowledge, thoughtfulness and competence about this signature issue of his, Clinton herself at last February’s debate in fact said exactly:
We now have power under the Dodd-Frank legislation to break up banks. And I’ve said I will use that power if they pose a systemic risk.
Leading me to post this here at AB on Thursday. It’s titled:
Clinton admits she failed to do her homework, and therefore misunderstood, when she stated at the February debate that Dodd-Frank already authorizes the Treasury Dept. to force too-big-to-fail banks to pare down and that therefore no further legislation authorizing it is necessary. That’s quite an admission by her, and the New York Daily News editorial board (and the Washington Post’s Chris Cillizza) should take note.
Which drew some blowback in the Comments thread from a couple of fellow progressives, including their insistence that Clinton did not admit that she failed to do her homework before February’s debate and therefore misunderstood, like she now says Sanders does, what Dodd-Frank actually provides.
Which in turn drew blowback from me. Specifically:
Clinton’s statement that Sanders is incorrect that under Dodd-Frank the Treasury Dept. does have the authority to declare particular financial institutions so large that a failure of that institution would create significant danger to the economy or to the broader financial industry and therefore to the economy, and therefore would effectively require a federal bailout, is EXACTLY a reversal of what she said at that February debate when fending off Sanders’s suggestion that additional legislation is needed.
So she either was right at the February debate or she was right this week in her comments about Sanders’s interview with that editorial board, but the statements, two months apart, are mutually exclusive. Since the February one matched Sanders’s statements to the editorial board, her comment that Sanders was wrong and would know this had he done his homework sometime during the 11 months since he began his campaign, she did indeed say by necessary implication that she was mistaken in that statement at the February debate, and that had she done her homework she would have known that.
Clinton is not making the issue of NOT proposing further legislation on too-big-to-fail, but in resisting proposals for further legislation, she sure has made her claim that there is no need for it because Dodd-Frank already takes care of the problem a part of her defense against Sanders’s candidacy.
Further, since apparently there is nothing in Dodd-Frank that authorizes, much less requires, the Treasury Dept. to actually take over the financial institution and break it up, or to dictate how exactly it would be broken up, but does apparently give Treasury the authority to determine that a bank must pare down to a specified size—Clinton was right in February, and Sanders was right in his interview with that editorial board, according to Stephen F. Diamond, an actual expert on Dodd-Frank who both teaches the subject at Santa Clara Law School and advises on it in private practice—the claim by most of the news media and also by Clinton that Sanders’s statement that this is so is exactly what those folks are claiming Sanders’s statement was: wrong as a matter of fact, and indicative of a failure to do homework on the subject. Or, in Paul Krugman’s case in his op-ed piece yesterday, a deliberate misstatement. (I assume that Krugman is sufficiently familiar with Dodd-Frank to know that, although—who knows? – maybe not.)
Diamond had a lengthy post on his own blog on Thursday titled “Don’t blame Bernie – of course the banks can be broken up”, (Dan here…link corrected) which I learned of because Naked Capital posted its title and link immediately about its post of the title of and link for this post of mine. I clicked the pingback link, saw my post listed, and saw Diamond’s immediately above mine.
The first four paragraphs read:
“In a recent interview, a very confused New York Daily News reporter continually mixed up the Treasury Department and the Federal Reserve in the face of a very straightforward statement of presidential candidate Bernie Sanders that Congress can give the President power to impose changes on the structure of the financial system “under Dodd Frank.”
“Well, the Treasury is an agency of the executive branch while the Federal Reserve is an independent hybrid public-private entity. The former is an extension of the power of the President while the latter has autonomy that limits, understandably, Presidential influence. Apparently in the minds of financial journalists the two entities can be conflated without consequence.
“Sure enough Secretary Clinton jumped on the bandwagon and slyly and indirectly suggested on Morning Joe that Bernie Sanders does not “seem” to know enough about how the economy works to be qualified as president.
“Now that we have cleared up the fact that it was the Daily News reporter who was confused not Sanders, let’s focus on the agency that a President does control, the Treasury. When Sanders said he wanted to use Dodd-Frank to break up the big banks one could consider that from two angles. First, does the current language of that law enable the federal government to break up the banks; and second, could Dodd-Frank be amended to give the federal government the power it needs to break up the banks. Since Sanders talked about going to Congress to empower the government to break up the banks it seems reasonable to conclude he means the latter, second method. But he is taking the view that any such amendment would be consistent with Dodd-Frank, a necessary extension consistent with the spirit of what Congress intended to do.”
Clinton did her usual thing: Someone fed her a line and she parroted it. I hope that at the debate on Thursday Sanders hangs this one around her neck. and tightens the noose until she gets that she needs to stop that tactic–even if she needs methadone to help her break the habit.
And, in response to a response:
Clinton said at the Feb. debate: ““We now have power under the Dodd-Frank legislation to break up banks. And I’ve said I will use that power if they pose a systemic risk.” What can that possibly mean other than that she thought then—or was saying that she thought then, even if she did not think then—that the federal government now has power under the Dodd-Frank legislation to break up banks. And since she said “And I’ve said I will use that power if they pose a systemic risk,” this presumably was not the first time she said that.
So she said, then and presumably earlier, that she will use that power if they pose a systemic risk. How so? What exactly did she have in mind then? And how exactly did she plan to exercise that power? Did she plan then to have the Treasury Dept. dictate how each bank must pare down? Or did she plan, as Sanders told that editorial board he would, to allow each bank to determine it, maybe with the assistance and recommendations of the experts at Treasury?
This was not merely a flip-flop by her last week; this was a statement by her that Sanders did not know what he was talking about on an issue critical to his campaign. She’s now retracted her own earlier statements—the one during the Feb. debate and the earlier ones she was referring to in that comment at the Feb. debate—and doing so by parroting journalists who clearly have no idea what Dodd-Frank actually contains and what the actual experts suggest would be the best way to have these banks pare down (a method the banks choose or instead a method that Treasury chooses). Did she herself not know what she was talking about when she made those earlier statements? And what exactly are her plans? And if she now believes that Dodd-Frank does not confer that power, does she think further legislation should do so—as Sanders has proposed?
Some of the journalists and political commentators who jumped on this bandwagon—Paul Krugman and the Washington Post editorial board, for example—do know that it was not Sanders but the New York Daily News editorial board who was clueless. Yet they chose to misrepresent—outright misrepresent—that Sanders was wrong about Dodd-Frank, the role of the Treasury Dept., and the role of the Fed, as well as the actual mechanism that would be used in paring down these financial institutions: it would be the institutions, not the Treasury or the Fed., that would structure it.
Some excellent political journalists, such as Annie Karni, who covers the Sanders campaign for Politico even late last week in reporting on Sanders referenced the NYDN editorial board interview with a comment that Sanders seemed to lack specifics about this signature issue of his (or some such). But she and the others were just picking up what the political-opinion journalists were saying. The editorial and op-ed folks who know the specifics of this issue quite well abuse their positions when they misstate the facts of actual legislation (e.g., Dodd-Frank) or expert policy consensus (e.g., who should determine how to restructure). And before they again accuse Sanders of dishonesty (as Krugman does in that op-ed), they should look in the mirror. And at their chosen candidate.
As for Clinton herself, her bandwagon-jumping nature is a big reason why so many people dislike her. But in this instance there was the additional element of dishonesty: she knew that Sanders rather than the editorial board members had it right about what Dodd-Frank provides. She had said so publicly, recently, in a statement in which she also said she had said that before.
I added an addendum to my Thursday post, on a different matter—but it’s really part and parcel of the same one: The New York Times fact check blog had fact checked a recent statement of Clinton’s in which she said she “couldn’t believe” it when she learned that Sanders was opposing the recent Paris climate-change agreement. Her intended implication of course was that Sanders thinks the agreement goes too far. Both the statement itself and the intended implication were false. Sanders supports the agreement as a first step and says much more is needed.
What’s the real story? What’s she leaving out? What intended inference is not true? What connection is she implying that is false? What word is she parsing or cutely redefining? Both Donald Trump and Ted Cruz are habitual, maybe pathological, liars, so hopefully it won’t matter that, in Clinton, the Democrats will be nominating someone who campaigns like a used-car-salesman cliché.
Tags: Bernie Sanders, Dean Baker, Hillary Clinton, Paul Krugman, Stephen F. Diamond, the Dodd-Frank law, The New York Daily News editorial board, the Washington Post editorial board
