Good article "Paul Krugman Crosses the Line" from dollarsandsense.org
Last edited Sun Apr 10, 2016, 06:40 PM - Edit history (1)
Article by Gerald Epstein
link:
http://dollarsandsense.org/blog/2016/04/paul-krugman-crosses-the-line.html
snip from the article:
Krugman similarly misinforms his readers in discussing Bernie Sanders’
command over the details of the Dodd-Frank law and what it has to say
about dealing with too-big-to-fail-banks. In a widely reported – and
misreported – interview with the /Daily News
<http://www.nydailynews.com/opinion/transcript-bernie-sanders-meets-news-editorial-board-article-1.2588306>/,
Sanders was asked how he would break up the big banks. Krugman was only
slightly more polite than /Vanity Fair /magazine which proclaimed that
the interview proved that “Sanders Doesn’t Know Diddly Squat About Wall
Street”
<http://www.vanityfair.com/news/2016/02/bernie-sanders-doesnt-understand-wall-street>.
Krugman referred to the “recent interview
<http://www.nydailynews.com/opinion/transcript-bernie-sanders-meets-news-editorial-board-article-1.2588306?cid=bitly>
of Mr. Sanders by /The Daily News/, in which he repeatedly seemed unable
to respond when pressed to go beyond his usual slogans.”
To sort this out, let’s look at the relevant part of the transcript:
Daily News: Okay. Well, let’s assume that you’re correct on that point. How do you go about doing it?” (That is: break up the big banks.)
Sanders: How you go about doing it is having legislation passed, or giving the authority to the secretary of treasury to determine, under Dodd-Frank, that these banks are a danger to the economy over the problem of too-big-to-fail.
Daily News: But do you think that the Fed, now, has that authority?
Sanders: Well, I don’t know if the Fed has it. But I think the administration can have it.
Daily News: How? How does a President turn to JPMorgan Chase, or have the Treasury turn to any of those banks and say, “Now you must do X, Y and Z?”
Sanders: Well, you do have authority under the Dodd-Frank legislation to do that, make that determination.
Daily News: You do, just by Federal Reserve fiat, you do?
Sanders: Yeah. Well, I believe you do.”
The relevant facts are these: Under Section 121 of the Dodd-Frank Act the Board of the Governors of the Federal Reserve has the authority, subject to a 2/3 vote of the Financial Stability Oversight Council (FSOC) to take a range of actions, including (as a last resort) to “require the company to sell or otherwise transfer assets of off-balance-sheet-items to unaffiliated entities”, that is, to shrink the size of the bank in question. Note that the Chair of the FSOC is the Secretary of the Treasury. So, Sanders is correct that the Federal Reserve and the Secretary of the Treasury are the key players here. To be sure, Sanders’ last statement above, that Federal Reserve could break up the banks just by fiat – whatever that means – is not true under section 121.
Still, the Federal Reserve has more tools under its control through Dodd-Frank. For example, under section 619 (one of the key sections outlining the so-called Volcker Rule that tries to ban proprietary trading), states that for these financial institutions “no transaction, class of transaction, or activity may be deemed a permitted activity……(iv) would pose a threat to the financial stability of the United States.” The Federal Reserve would have significant power to issue regulations in this situation. More generally, the goal of Dodd-Frank, as stated in Section 112 in describing the mission of the newly created Financial Stability Oversight Council (FSOC) is “eliminating expectations on the part of shareholders, creditors, and counterparties of such companies that the Government will shield them from losses in the event of failure.” That is, end too big to fail.
In the end, Dodd-Frank does provide tools and responsibilities to the Fed and to the Secretary of the Treasury, along with other financial regulators, that can be used to break up the banks. Sanders’ answer was inelegant, to be sure, but, in reality, his answer reflects the fact that the law is on unchartered territory and in places is vague and would certainly be contested by the banks. So Bernie’s first answer is also the cleanest. “How you go about doing it is having legislation passed …”
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Much more at the link
= new reply since forum marked as read
I will never forget him prostituting himself and his profession to help Bill Clinton hard Sell NAFTA to a gullible America. As predicted by many others, the Working/Middle Class had been paying for this scam ever since, while the RICH got even RICHER.
Only in later years, when it was obvious to everyone that NAFTA was a disaster, did Krugman attempt to walk back his support (and cheer leading ) for NAFTA.
While Krugman IS a brilliant man, and I usually read what he has to say, I always do so with the same skepticism that I have when listening to a low rent carnival barker trying to sucker people into a rip off sideshow. Krugman has sold us out before, and he will do it again.
