There’s a eulogistic atmosphere descending on the Bernie Sanders campaign, the scent of autopsy.

As he heads into five U.S. primaries Tuesday, the junior senator from Vermont with the scare of white hair faces the gathering consensus that Hillary Clinton is all but unbeatable in the race for the Democratic nomination.

A smug “gotcha” still echoes from Sanders’ failure to explain clearly to the editorial board of the New York Daily News under what authority, if elected, he would break up the big banks. Even ardent supporter Robert Reich, secretary of labor under Bill Clinton, couldn’t fully unwind that one.

But surely the staunchest Sanders critic might be inclined to credit some of the shaping of the Clinton campaign to the nettlesome Sanders, particularly in the areas of trade alliances and Wall Street reform.

On the latter, Sanders grew a groundswell of support for his call to reinstate the Glass-Steagall Act, the Depression-era legislation that separated high-risk investment banking from mom and pop deposits after share-issuing banks collapsed by the hundreds. Yardage of ink has since been spilled on whether the financial crisis of 2008 could have been averted if Glass-Steagall were still in place. Well, look at this from another angle. Nobel Prize winning economist Joseph Stiglitz nailed it when he wrote that when repeal of Glass-Steagall brought investment and commercial banks together, “the investment bank culture came out on top.”

The growing power of the big finance houses on Capitol Hill was self evident, with those players making the ultimately convincing argument that financial deregulation went hand in hand with globalization all in aid of underpinning the very tenets of democracy.

Then President Bill Clinton drank the Kool-Aid and repealed the act in 1999. Alan Greenspan was chair of the Federal Reserve at the time. The result, the Financial Services Modernization Act, was in Greenspan’s view a milestone of business legislation. “I’ll always remember it as an unsung moment of policy making for which there ought to be a little song,” he wrote in his autobiography.

There have been plentiful reasons for investment banking CEOs to be merry. Last fall, the Atlantic magazine noted that after the savings and loan crisis in the 1980s, more than 1,000 executives were jailed. The serving of “justice” after the financial crisis a quarter century later was more accommodating. A choice anecdote from the same Atlantic piece: “In early 2014, just weeks after Jamie Dimon, the CEO of JPMorgan Chase, settled out of court with the Justice Department, the bank’s board of directors gave him a 74 percent raise, bringing his salary to $20 million [U.S.]”

Reckless banking and accommodating side deals fueled the Sanders’ twin campaign lines that the game is rigged and greed is king. Reckless lending destroyed the lives of untold Americans who only wanted what every American wants: a house. In Greenspan’s bloodless description these were “financial deficit households.”

In 2006 $3 trillion worth of mortgages were originated in the U.S. Of those, 20 per cent were sub-prime. Another 20 per cent were “Alt-A” — interest only mortgages extended to buyers who would later default in droves. More than five million homes in the U.S. fell into foreclosure.

The result: a deepening of the reshaping of America into a two-tiered rich-poor economy.

In my reading, Hillary Clinton was not quickly responsive to Sanders’ call to fix Wall Street. Her campaign lines about returning economic growth and optimism to America sounded rote and inch deep. (“I want to be the president for the struggling and the striving.”) In December, her op-ed piece in the New York Times under the rubric: “How I’d Rein in Wall Street” appeared to be an awakening. Executives needed to be held accountable, she wrote. No one should be too big to jail, she added.

Well, we shall see. Her most substantive proposals are the imposition of a risk fee on the biggest banks (those with more than $50 billion in assets) and ensuring that the federal government “has — and is prepared to use — the authority and tools necessary to reorganize, downsize and ultimately break up any financial institution that is too large and too risky to be managed effectively.”

She did not mention the Financial Stability Oversight Council, established under the Dodd-Frank Act, which was brought in after vigorous kicking and screaming from Wall Street.

Was she fully versed in the powers already in place, the very type of question that tripped up Sanders?

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The Sanders view is that trying to catch up after the fact to hazardous behaviour on the part of banks has been proven to be a mug’s game. He believes that the “culture” described by Joseph Stiglitz has to be redefined. Under pressure from her populist opposition, Clinton has come some way to acknowledging that no bank should be too big to manage. Now that she’s posed the problem, it is now Clinton’s turn to more precisely explain how she would fix it.

jenwells@thestar.ca

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