JARED BALL: What's up world, and welcome back to the Real News Network. I'm Jared Ball here
in Baltimore.
This month marks the fifth anniversary of the Dodd-Frank Wall Street reform and consumer
protection act. The Obama administration claimed attempt to prevent another financial crisis
like the one that hit in 2008. but what has this really meant? Are we all really safer
now? Helping us answer these and other questions is Gerald Epstein who is an economist and
researcher with the Political Economy Research Institute up at UMass Amherst, and is co-author
of a new report: Banking from Financial Crisis to Dodd-Frank: Five Years On, How Much Has
Changed.
Welcome back to the Real News, Gerald Epstein.
GERALD EPSTEIN: Thank you very much for having me.
BALL: So let's start with that. Tell us what you all have found. Has much changed, are
we safer now? What is it that you all have concluded in this report?
EPSTEIN: Well, I did this report with Juan Montecino. And the two of us, with the help
of Americans for Financial Reform looked at the evolution of banking and whether banking
trends have changed very much since the passage of Dodd-Frank. In particular we wanted to
see if banking's gotten safer, if it's started contributing more to the real economy, to
Main Street, to families, to small businesses.
What we found in a nutshell is that there are certain ways in which it's gotten safer.
That is, the couple of ways that leverage is down, that is the risky--the amount of
risky bets, the banks are taking those down somewhat relative to the capital that they
have. The banks' cushion of capital is higher than it was just prior to the crisis. So in
these respects, banking has gotten a bit safer. And the Dodd-Frank act is I think somewhat
if not largely responsible for some of these trends.
But in other ways the same trends that we saw in banking that led to get--become so
dangerous, and additional trends have really started accelerating again. So I think when
you add everything up, I'd say that we're a bit safer but not nearly as much safer as
we should be.
BALL: So on the right we see criticism saying that more regulation will lead to greater
chance of a major crisis that will have an even greater impact. And then on the far left
some of us would argue that there should be a nationalization of the banks. What do you
think actually should happen, and what do you think are the best or most likely next
steps to actually take place?
EPSTEIN: Well first of all, the Republicans have launched a campaign fueled by millions
of millions of dollars of lobbying by the financial services industry, the banks. The
hedge funds, the private equity firms, the insurance companies. To prevent Dodd-Frank
from being properly implemented. They've launched this campaign to poke holes in it, to delay
it. To starve the regulatory agencies like Commodity Futures Trading Commission, the
FCC, so that they can't implement it.
So they've launched, they've waged this campaign from day one, and they've had some big successes.
Their argument that it's made the financial system more dangerous is without any merit
whatsoever. There's no real evidence that it's made the financial system more dangerous.
They say it will dry up liquidity, but in fact it was excessive liquidity that led to
the housing bubble in the first place. They say it will raise the costs of borrowing to
consumers, but in fact most of the banks and financial institutions want, and I found are
holding excess reserves and lending for speculative reasons, not to small businesses or Main Street,
and Dodd-Frank has had nothing to do with that. So in fact those bankers just want to
get rid of Dodd-Frank so that they can get back to doing exactly what they were doing
before.
So what's, what's likely--what should be happening? Well, there's some movement on the part of
senators and congresspeople, more on the left, some Democratic senators and congresspeople
like Elizabeth Warren, who's argued for a new Glass-Steagall Act to separate investment
from commercial banking. Separate risky, speculative banking from the core banking that's supposed
to serve the economy. Others have, Bernie Sanders has proposed breaking up the big banks.
There are others who propose tithing the regulations on derivatives, and so forth.
All of these I think are very good ideas. And should be supported, and should be, should
be defended. But they're not enough. So nationalizing the banks, well, I think one of the important
things that we ought to be doing is promoting more alternatives to private banks. So there's
a state bank in North Dakota, for example. There have been state banks that have been
proposed for other states. The Federal Reserve and the Treasury Department should give more
support for cooperative banks, for community banks, make it easier for credit unions and
other more cooperative banks to work.
And in the extreme, if banks threaten to go bankrupt again, or go bankrupt as they did
in 2008, then yes. Nationalize the banks, and start running them in the interest of
the public rather than let the bankers continue to make millions of millions of dollars.
So nationalization is one tool, but there are many other things that can be done as
well, short of that.
BALL: Gerald Epstein, thank you very much for joining us for this segment here at the
Real News Network.
EPSTEIN: Thank you very much for having me.
BALL: And thank you all for joining us as well. And for all involved, I'm Jared Ball
here again in Baltimore. And as always as Fred Hampton used to say, to you we say peace
if you're willing to fight for it. Peace, everybody. Catch you in the whirlwind.