Sanders is late to the Wall Street revolution

IF there is one presidential candidate who embodies the nation's lingering post-2008 rage at Wall Street, that surely has to be Bernie Sanders. No other candidate has argued as strenuously for financial reform, or used rhetoric that so forcefully paints a struggle between the financial industry and the rest of the economy. Whether that narrative is accurate, Sanders' concrete proposals give the impression that he hasn't carefully evaluated the policy landscape.

Some of the things Sanders is suggesting have largely been done. For example, he recently declared that in its first 100 days, his administration would "create a list of too-bigto-fail banks and insurance companies." Such a list already exists. Under the Dodd-Frank Act of 2010, the Financial Stability Oversight Council -- a branch of the Treasury Department -- must maintain a list of systemically important financial institutions (SIFIs) -- that is, banks, brokerage firms and insurance companies that are considered too big to fail because their collapse would endanger the financial system. So Sanders' proposal is already reality.

Other proposals don't seem like they would address the problems Sanders thinks they will address. For example, he recently tweeted: Real Wall Street reform means…reestablishing firewalls that separates risk taking from traditional banking. Here Sanders is talking about re-implementing the GlassSteagall Act -- a Depression-era rule that sep- arated investment banking from commercial banking -- which was repealed in 1999. Sanders has attacked rival Hillary Clinton for not strongly supporting its return.

The problem is, there is no indication that Sanders really understands what GlassSteagall does. All aspects of banking involve risk-taking. Investment banks underwrite and sell securities for corporations, which entails the risk that these companies will not be able to repay their obligations. Commercial banks take deposits and make loans, thereby incurring the risk that the loans will not pay off. Separating these two activities will do very little, if anything, to make banks less risky. In particular, Glass-Steagall would have done almost nothing to prevent the 2008 financial crisis. The costly mistakes made by the big banks that led to their insolvency weren't in the area of investment banking. Banks got into trouble by buying toxic mortgage-backed securities and using too much leverage, not by underwriting failing companies.

There are better ways of separating risktaking activities from the banks that hold Americans' deposits. One major such reform has already been accomplished -- the Volcker rule, which bars banks from making many kinds of speculative investments with taxpayer-guaranteed deposits. Sanders, however, doesn't acknowledge this success.

Other financial reform proposals of Bernie's seem either bizarre or inadvisable. For example, Sanders has declared that he wants to fund free college tuition with a tax on financial transactions. However, Italy's experience shows that while this sort of tax -- called a Tobin tax, after the economist James Tobin -- is effective at reducing trading volumes, it isn't very good at raising money. In that country, taxing financial transactions yielded only a fifth of the expected revenue, and this number will probably drop even more in the long term. Estimates confidently predicting hundreds of billions of dollars in revenue from this sort of tax are almost certainly overblown. A financial transaction tax would help curb high-frequency trading -- another activity that had no real role in the 2008 crisis -- but it won't provide a stable source of education funding for U.S. colleges.

Another example is Sanders' obsession with fees charged for using automated-teller machines. He has repeatedly vowed to cap ATM fees at $2 per transaction. How he arrived at the $2 number is anyone's guess. But regardless of whether a $5 ATM fee is unfair, it's hardly much of a burden. If the ATM fee is higher, just go to the ATM less often, and take out more cash each time. So it isn't clear why Sanders has chosen to focus on this fee, especially when ATMs are obviously a product that provides great value to millions of people. A final example is Sanders' proposal to audit the Federal Reserve. Sanders has been working with Senator Rand Paul on this initiative. But as former Fed Chairman Ben Bernanke has explained, the Fed is already audited.