Sanders' Radical Plan Goes Well Beyond Breaking Up Big Banks

WASHINGTON — Democratic presidential candidate Sen. Bernie Sanders stepped up his attacks Tuesday against the largest banks, going beyond his previous calls to break them up and outlining a series of other policy proposals that would revamp the financial system.

In a speech in New York City, Sanders vowed to remove the ability of the Federal Reserve to pay interest to banks for their excess reserves, turn the credit rating agencies into nonprofits, allow the U.S. Postal Service to offer bank products, and cap ATM fees and interest rates for loans.

Such a sweeping agenda would be almost impossible to implement given the current makeup of Congress, as it goes too far even for many Democrats. But Sanders couched himself as the true progressive in the presidential election, arguing his main opponent, front-runner Hillary Clinton, does not go far enough.

"Secretary Clinton says we just need to impose a few more fees and regulations on the financial industry. I disagree," Sanders said. "We will no longer tolerate an economy and a political system that has been rigged by Wall Street to benefit the wealthiest Americans in this country at the expense of everyone else."

Following were the key points to Sanders' vision of reform:

Revamping the Fed

As he has in the past, Sanders called for bankers to be banned from serving on the board of directors of the regional Fed banks. Sanders has previously said the Fed presidents should be nominated by the U.S. president and confirmed by the Senate.

But Sanders also went further, targeting the interest the central bank pays banks on excess reserves held at the regional Fed banks. Fed Chair Janet Yellen recently defended the ability to pay interest on reserves, saying it was an essential tool for monetary policy. But Sanders — echoing conservative critics including Sen. Ted Cruz, R-Texas — said it was a mistake.

"The Fed should stop paying financial institutions interest to keep money out of the economy and parked at the Fed," Sanders said. "Instead of paying banks interest on these reserves, the Fed should charge them a fee that could be used to provide affordable loans to small businesses to create hundreds of thousands of jobs."

Credit Rating Agencies

Among his more radical suggestions, Sanders said the credit rating agencies should be turned into nonprofits, blaming their business model for causing the financial crisis.

"Investors would not have bought the risky mortgage backed derivatives that led to the Great Recession if credit agencies did not give these worthless financial products triple-A ratings — ratings that they knew were bogus," Sanders said. "And the reason these risky financial schemes were given such favorable ratings is simple — Wall Street paid for them."

He argued that they should become "nonprofit institutions, independent from Wall Street."

"We cannot have a safe and sound financial system if we cannot trust the credit agencies to accurately rate financial products."

Interest Rates and ATM Fees

Sanders called for hard caps on interest rates for loans and credit cards as well as ATM fees. He said ATM fees should be no more than $2 and that interest rates on credit cards and consumer loans should not exceed 15%.

"It is unacceptable that millions of Americans are paying credit card interest rates of 20% or 30%," Sanders said. "The Bible has a term for this practice. It's called usury. And in 'The Divine Comedy,' Dante reserved a special place in the Seventh Circle of Hell for those who charged people usurious interest rates. Today, we don't need the hellfire and the pitchforks, we don't need the rivers of boiling blood, but we do need a national usury law."

Sanders invoked existing limits on credit unions.

"In 1980, Congress passed legislation to require credit unions to cap interest rates on their loans at no more than 15%," he said. "That law has worked well. Unlike big banks, credit unions did not receive a huge bailout from the taxpayers of this country. It is time to extend this cap to every lender in America."

Given that Congress is controlled by Republicans, it is next to impossible that even if Sanders were elected, itself an unlikely event, he could find the necessary votes to enact such stiff limits.

Allow U.S. Post Offices to Offer Bank Products

Sanders once again touted a plan suggested by the inspector general of the USPS for the cash-strapped system to offer banking products, arguing it was a way to break the hold payday lenders have on many Americans.

"Post offices exist in almost every community in our country," he said. "One important way to provide decent banking opportunities for low-income communities is to allow the U.S. Postal Service to engage in basic banking services, and that's what I will fight for."

Breaking Up the Big Banks

Sanders also repeated his vow to break up the largest banks, while adding some more details on how he would do so. Under Sanders' plan, he would have the Treasury secretary draw up a list of 100 "too big to fail" commercial banks, shadow banks and insurance companies that posed the greatest risk the financial system and break them up within the first year of his presidency.

"Within one year, my administration will break these institutions up so that they no longer pose a grave threat to the economy as authorized under Section 121 of the Dodd-Frank Act," Sanders said.

He also endorsed a bill co-authored by Sen. Elizabeth Warren, D-Mass., that would reinstate the Glass-Steagall Act, arguing the Depression-era law's repeal in 1999 (under President Bill Clinton) spurred the financial crisis.

Sanders also listed a series of headline-grabbing fines that have been levied against the largest banks since the crisis but noting that no executive has gone to jail. He vowed to end "too big to jail."

"The reality is that fraud is the business model on Wall Street. It is not the exception to the rule. It is the rule," Sanders said "Under my administration, Wall Street CEOs will no longer receive a get-out-of-jail-free card."