AROUND NEW HAMPSHIRE
1. Primary Notes
New Hampshire Primary Source: ‘Bern-ing’ questions about Sanders
from Primary Source, by John DiStaso, wmur.com, October 22, 2015
THE BERN-ING QUESTIONS. With U.S. Sen. Bernie Sanders coming back to earth in recent Democratic presidential polling in New Hampshire, it is becoming noticeable that he hasn’t been to the state often lately.
Is Bernie taking his neighboring state for granted? Some political observers are beginning to ask that question. We can’t imagine that he would do that, but the record shows he’s spent much time in Iowa lately, as well as Virginia, Massachusetts, Arizona and elsewhere.
He hasn’t campaigned in New Hampshire since Sept. 25, when he spoke to the Portsmouth Democratic committee banquet. He was also in-state on Sept. 19 for the New Hampshire Democratic Party state convention.
The campaign says Sanders will be back soon, although it had nothing specific to announce as of Wednesday afternoon.
If not before, Sanders will return sometime in November to file his candidacy in the New Hampshire primary at Secretary of State Bill Gardner’s office. The filing period opens on Nov. 4 and closes on Nov. 20.
When Sanders does file, it will be a closely watched event. Not just because it’s Bernie.
It will be of special interest also because of the anticipation over how he will address the state filing requirement that he – and all candidates – formally declare that they are registered members of a political party. Sanders, of course, is an independent.
We raised the question way back in April (see our story here). As of late Wednesday, Gardner still had not heard from the Sanders campaign about how he intends to address the requirement or any questions about it.
Here, by the way, is New Hampshire’s Declaration of Candidacy form.
To refresh your memory: Vermont is an open state. Vermonters do not register as Democrats or Republicans. Everyone is essentially undeclared and can vote in either primary.
It’s not the only open state, certainly, and other presidential candidates have filed for New Hampshire primaries not having been registered as either Democrats or Republicans.
The difference is that Sanders, after winning Democratic primaries for the U.S. Senate in 2006 and 2012, rejected the party’s nominations both times, preferring to run not as a Democrat, but as an independent.
How will the campaign address potential questions from Gardner, or, potentially, someone who may challenge Sanders over his eligibility? The campaign says its attorneys are working on it and have the situation under control.
While the campaign is keeping quiet on details, there will have to be some evidence offered that Sanders is recognized as a Democrat, not only on Capitol Hill, but also in his home state.
We shall see.
VAN OSTERN: TAKING THE PLEDGE; SUPPORT GROWS. In a WMUR.com report Tuesday, sources close to soon-to-be Democratic candidate for governor Mark Connolly said the former state securities bureau chief will pledge to veto broad-based taxes when he declares.
For the record, that makes two Democrats opposed to a sales or income tax for the state.
Executive Councilor Colin Van Ostern told New Hampshire Primary Source he opposed an income tax and sales tax in his two Executive Council campaigns and has no intention of changing his position as a candidate for governor.
Executive Councilor Colin Van Ostern told New Hampshire Primary Source he opposed an income tax and sales tax in his two Executive Council campaigns and has no intention of changing his position as a candidate for governor.
Meanwhile, Van Ostern will have his first fundraiser since announcing his candidacy on Nov. 1. It will be hosted by James Putnam, former CEO of Keene-based Markem Corp. and a past chairman of the New Hampshire Charitable Foundation.
Van Ostern in the past week has also been endorsed by six state House members: 15-term Rep. Janet Wall of Durham, 10-term Rep. Barbara French of Henniker, 10-term Rep. Mary Stuart Gile of Concord, as well as Reps. Paul Berch of Westmoreland, Clyde Carson of Warner and Geoffrey Hirsch of Bradford.
WHO ELSE IS IN? Several Republicans and at least one more prominent Democrat are continuing to very seriously consider running for governor.
We understand State Senate Majority Leader Jeb Bradley and Senate Finance Committee Chairwoman Jeanie Forrester, as well as Sen. Andy Sanborn, are very encouraged by the support they are receiving, and are moving closer to decisions.
The question is whether both Bradley and Forrester will run from the “establishment” wing of the party.
Many Democratic activists are patiently awaiting a decision from Portsmouth City Councilor Stefany Shaheen, who, we’re told, has been promised support from key constituency groups and is weighing family considerations while promoting her new book, “Elle and Coach.”
ANDRU FOR COUNCIL? Attorney Andu Volinsky, a top attorney at the Bernstein Shur firm and the legendary (winning) lead plaintiffs attorney in the Claremont school funding trial of the mid 1990s, may be getting into elective politics.
New Hampshire Primary Source has learned from Democratic sources that Volinsky is being encouraged to run for the District 2 Executive Council seat being vacated by Van Ostern.
POLLS, AND MORE POLLS. New Hampshire was inundated with polls this week, most of them before Vice President Joe Biden announced he won’t run for president.
Before we review those polls, it’s worth noting that, based on our own most recent WMUR Granite State Poll, released on Sept. 24, Hillary Clinton stands to gain the most in New Hampshire from Biden’s exit.
The poll showed that Biden was supported by 14 percent of likely voters, with Bernie Sanders at 46 percent and Hillary Clinton at 30 percent. Asked for their second choice, 40 percent of Biden supporters named Clinton and 19 percent named Sanders.
“Since then, other polls in the state and nationally have shown similar results,” University of New Hampshire Survey Center director Andrew Smith said. “The only silver lining for Bernie is that the anti-Clinton and anti-establishment vote will coalesce around him and not anticipate some other white knight to come riding in. Of course, that’s small consolation.”
Meanwhile, one longtime friend of Biden, former state Supreme Court Justice John Broderick told New Hampshire Primary Source on Wednesday night that with Biden out of contention, he’s backing Clinton. Broderick is one of former President Bill Clinton's original supporters in New Hampshire.
The former secretary of state has apparently closed the gap between her and Sanders since the Granite State Poll was released and since last week’s Democratic debate. This week, a Boston Globe/Suffolk University poll showed Clinton leading Sanders, 37 percent to 35 percent. But a Boston Herald Franklin Pierce University poll had Sanders up, 38 percent to 30 percent.
Public Policy Polling of North Carolina had Clinton leading Sanders, 41 percent to 33 percent; a poll by WBUR had Clinton up, 38 percent to 34 percent; and a poll released Wednesday by Purple Strategies and sponsored by Bloomberg Politics and Saint Anselm College had Sanders leading Clinton, 41 percent to 36 percent.
In other words, with three-and-a-half months to go, it’s close.
TRUMP STILL UP. On the Republican side, polls continue to show Donald Trump in a strong position in the state.
The Bloomberg/Saint Anselm/Purple Strategies poll had him at 24 percent, with 17 percent for Ben Carson and 10 percent for Jeb Bush. Carly Fiorina and John Kasich were at 7 percent each.
Trump also led Carson by double-digit margins in the Boston Herald/FPU poll and the Public Policy Polling survey.
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FIGHTING CHRONIC DISEASES. The New Hampshire primary is often used as a catalyst by interest groups to bring their issues to the forefront, and this year is no exception.
One of the first groups to make a big push is the Partnership to Fight Chronic Disease, which describes itself as “a coalition of patient, provider, community, business and labor groups committed to raising awareness of the number one cause of death, disability and rising health care costs: chronic disease.”
Those diseases include cancer, diabetes, asthma, hypertension and heart disease.
According to the group, treatment of these diseases costs $2.5 trillion of the $2.9 trillion spent annually on health care in the United States.
The group intends to encourage voters to ask the presidential candidates how they intend to address the issue through digital, radio and print advertising. It will also launch what it calls a “substantial grassroots component focused on engaging presidential candidates” on the issue.
The group’s chairman, Dr. Kenneth Thorpe, will be in New Hampshire on Thursday to launch a state chapter.
The New Hampshire co-chairs are Heather Carroll, regional manager of the Alzheimer’s Association of Massachusetts and New Hampshire; state Senate Democratic Leader Jeff Woodburn, executive director of the Council for Youths with Chronic Conditions of New Hampshire; Mike Dennehy, chairman of Special Olympics New Hampshire; and Susan MacNeil, executive director of AIDS Services for the Monadnock Region.
NO DECISION, YET, ON NAME CHANGE. When the New Hampshire Democratic Party holds its annual Jefferson-Jackson Dinner on Nov. 29, it will still be known as the Jefferson-Jackson Dinner.
As we’ve reported, the party appointed a committee during the summer to consider and recommend to party officials whether it should follow the lead of several other state Democratic parties and change the name, in reaction to presidents Thomas Jefferson and Andrew Jackson having been slave owners. But a New Hampshire Democratic Party spokeswoman said this week the decision has been put off indefinitely.
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REACHING HIGHER NEW HAMPSHIRE. A new bipartisan effort grassroots effort to “support, improve and champion public education in New Hampshire” will launch on Thursday. Dubbed “Reaching Higher New Hampshire,” the campaign is being chaired by Concord attorney and veteran political strategist Tom Rath. It will push for “cooperation and bipartisan compromise on policy decisions facing the state” on the education front, according to an excerpt of the announcement obtained by New Hampshire Primary Source.
CONCERNED ABOUT MERGERS. Hillary Clinton released a statement on Wednesday expressing concern about the proposed mergers of insurance giants Cigna and Anthem, and Humana and Aetna. She said the Cigna-Anthem proposal “could raise market concentration in New Hampshire to excessive levels, and both have concerning effects on competition in other markets.
“These mergers should be scrutinized very closely with an eye to preventing the undue concentration that they appear to create. These companies should commit to passing on savings and efficiencies to consumers as lower premiums and out-of-pocket costs,” Clinton said.
Clinton, by the way, will return to the state on Wednesday to speak to a Politics and Eggs event at the New Hampshire Institute of Politics and at a Carroll County Democratic fundraiser at the Attitash Grand Summit in Bartlett.
IBEW BACKS BERNIE. Bernie Sanders won the endorsement of the Concord-based International Brotherhood of Electrical Workers Local 490 on Wednesday. The union, which has 300 active members and 185 retired members, cited Sanders’ “longstanding commitment to progressive values.” Business manager Denis Beaudoin said, “He understands the common people, the working people, the middle class and stands with us.”...
2. An Opponent for Annie Kuster?
GOP House majority leader eyes run for Congress
by the Associated Press, concordmonitor.com, October 22, 2015
CONCORD, N.H. (AP) — Republican Jack Flanagan, majority leader of the New Hampshire House, is exploring a run for Congress against Democratic incumbent Annie Kuster.
Kuster, now serving her second term, represents the state's 2nd Congressional District, which spans the western half of the state and includes the cities of Concord and Nashua. Flanagan is the first Republican to announce interest in challenging her.
Flanagan, of Brookline, is in his third term in the House and his first as majority leader.
He says he met with representatives from the National Republican Congressional Committee in Washington, D.C., to discuss a potential candidacy and plans to spend the next few weeks talking with voters in the district to decide whether he should run.
3. Noticing the Executive Committee
With Two Members Gunning for Higher Office, Executive Council Gets the Spotlight
by Josh Rogers, nhpr.org, October 22, 2015
N.H.’s Executive Council took its show on the road Wednesday to the town of Mason. There was no high-profile item before the council, but regardless of the agenda, expect the council to be front and center politically through next November.
There are two things that made the council meeting in Mason a bit out of the norm: the dozens of people who showed up to voice opposition to the proposed Kinder Morgan Pipeline -- a project over which the council has no direct say -- and the political dynamic afoot now that Governor Hassan is running for U.S. Senate and two councilors, Republican Chris Sununu and Democrat Colin Van Ostern, are openly vying to be her successor. This all collided outside Mason town hall.
"I’m getting educated about it. FERC is getting educated about it. The SEC will be very educated by it."
That was Governor Hassan talking to one protestor.
Across the street, Councilor Colin Van Ostern spoke to another.
“I mean I’ve heard a lot of concerns both about the fracking, but also why it’s coming through NH in the first place. And I haven't heard good answers to those questions yet."
A few steps away an activist was waylaying Councilor Chris Sununu.
“Where do you stand?”
“You know I’m keeping everything open, like I was saying. I’m meeting all of them.”
“That’s spinning. You’ve got to come out. You can’t just keep it open. You’ve got to come out, for or against."
“One way or the other we will get there, absolutely."
Sununu was talking about staking a firm position on pipeline, but the same could be said about keeping the council running smooth through November. Election years tend to make the generally collegial council more partisan. And never before have three of the six people sitting at the council table been gunning for statewide office.
That means there will be no shortage of scrutiny of the council’s work.
On this day a tracker from the Republican group America Rising was filming Governor Hassan’s every move. The Democratic group American Bridge has been known to do the same to Councilor Sununu.
As election season begins in earnest the attention will only grow. Governor Hassan will likely bear the brunt of this, but says she’s confident the fresh prominence of a generally sleepy part of government won’t get in the way of the state’s business.
“I think we’ve been focused on the work of the council well in the last few meetings and you see that everybody is working very hard. “
And will be working hard to win next year’s election.
4. Ayotte: The Only Green She Knows is Money
Ayotte Fact Check: Undermining The Environment
by Ttaraila, nhdp.org, October 22, 2015
Concord, N.H. – As part of the New Hampshire Democratic Party’s “Ayotte Fact Check” accountability project, we will be highlighting a different area of Kelly Ayotte’s true Washington record every day this week.
Today’s focus is Ayotte’s record of undermining the environment.
“Kelly Ayotte’s lifetime score of 23% from the League of Conservation voters would be bad in any light, but it’s particularly troubling when you consider that it’s worse than even Scott Brown’s lifetime score of 38%,” said New Hampshire Democratic Party Chair Ray Buckley. “Since going to Washington, Ayotte has consistently put her special interest backers like the Koch Brothers and Big Oil before New Hampshire’s environment, voting to force construction of the Keystone XL pipeline, undermine enforcement of the Clean Power Plan, and more.”
“No matter how hard special interest favorite Ayotte tries to ‘greenwash’ her record, New Hampshire voters will reject her next year just like we did Scott Brown,” added Buckley.
See below for the facts on Kelly Ayotte’s record of undermining the environment:
Ayotte has a lifetime score of 23% from the League of Conservation voters. For perspective, that’s even lower than Scott Brown’s lifetime score of 38%.
In 2010, Ayotte Said “I don’t think the evidence [on climate change] is conclusive.” Since then, Ayotte has voted to force construction of the Keystone XL pipeline, expand offshore drilling with oversight standards weaker than the ones in place before the 2010 Deepwater Horizon oil spill, undermine enforcement of the Clean Power Plan, and more.
5. Can't Buy Them Love
In N.H., Big Ad Spending Doesn't Buy Voter Love for GOP Candidates
by Brian Wallstin, nhpr.org, October 21, 2015
Turn on the television in New Hampshire these days, and you won’t have to wait long before Jeb Bush, John Kasich or Chris Christie pops up on your screen.
Super PACS backing the three Republican presidential candidates have already spent millions on ads targeting Granite State voters.
But look at the polls and you’ll have to work a bit harder to find them. All three are well behind a candidate who hasn’t appeared in a single political ad in New Hampshire – Donald Trump.
According to documents filed with the Federal Communications Commission, by the end of this month, network broadcasters that reach New Hampshire voters will have aired an estimated $16.3 million in primary–related ads. Almost 70 percent of that airtime - totaling just under $11 million - was reserved by independent groups, mostly Super PACs, that support Bush, Kasich and Christie.
Meanwhile, Bush is the only one of the three who cracked single digits in the latest poll of Republican primary voters. The Bloomberg Politics/St. Anselm College survey, released Wednesday morning, put Bush’s support at 10 percent, 14 points behind Trump; Kasich (7 percent) and Christie (5 percent) have even more ground to make up.
Whether more ads are the answer is debatable, but that seems to be the plan, at least for now.
CREDIT SARA PLOURDE/NHPR
Right to Rise, the super PAC supporting Bush, has contracted for at least another $3.8 million in network ad time through New Hampshire Primary day (tentatively scheduled for Feb. 9). More than $2 million has been reserved by America Leads, which backs Christie; and two PACs supporting Kasich are planning to spend another $1.4 million.
And then there is Ben Carson.
At 17 percent, the former pediatric neurosurgeon is second in New Hampshire behind Trump in the Bloomberg/St. Anselm poll, and last week, he reported raising $21 million in the third quarter, more than any other Republican candidate. Yet Carson has spent less than $142,000 on ads in the state, and has no air time reserved beyond the first week in November.
That’s about the time Marco Rubio and his backers will begin advertising in earnest. Rubio's campaign, a super PAC, Conservative Solutions and a 501(c)3 , the Conservative Solutions Project,* plan to spend close to $5 million on ads right up to primary day.
While more competitive and much less cluttered, the Democratic side reveals a similar dynamic.
Hillary Clinton, who trailed Bernie Sanders in New Hampshire until this week’s WBUR poll put her four points ahead, is the only Democrat in the race to run TV ads in the Granite State. Her campaign has spent nearly $3 million so far, with another $500,000 in air time reserved through the end of the year.
Clinton also has the support of a super PAC, but her campaign has been footing the advertising bills. Because federal election law limits what broadcasters can charge candidates for air time, Clinton is getting more for her money.
Much more
This week, for instance, Clinton has scheduled 213 ads on four network stations that reach Granite Staters, according to FCC filings. She’ll pay an estimated $167,000, or roughly $785 per spot.
Meanwhile, New Day for America and New Day Independent Media – the super PACs supporting John Kasich – plan to run 66 ads this week, for which they will pay around $262,000. That works out to almost $4,000 per 30-second spot, more than five times the rate paid by the Clinton campaign.
Super PACs, which have dominated local advertising so far, may not be getting much bang for their buck, but the broadcasters are, especially WMUR.
New Hampshire’s only statewide television station is projected to take in $2 of every $3 spent on primary-related ads through October, or $10.7 million.
AND NATIONALLY
6. Jeb's Health Plan: Don't Get Sick
Jeb Bush's Health Plan: If You Don't Anticipate Getting Sick, You Might Like It
by Dean Baker, cepr.net, October 20, 2015
Last week, former Florida Gov. Jeb Bush put forward a healthcare proposal as part of his campaign for the Republican presidential nomination. The plan, which has many moving parts, is intended as a replacement for the Affordable Care Act. If you don't anticipate getting sick, you might like it. Instead of healthcare exchanges and mandated insurance, Bush's plan would provide tax credits for buying catastrophic coverage. This means the government would pick up a substantial share of the cost of a plan that has a large deductible, with the insurance only kicking in after a person had paid close to $7,000 out of his or her own pocket, or $13,000 for a couple.
At the same time, the Bush plan would eliminate the requirement that insurers disregard preexisting conditions. Under the ACA, a person with cancer or diabetes can sign up for insurance and pay the same premium as a healthy person of the same age. While the Bush plan does include some protections, it does not guarantee coverage at an affordable price. In this respect, the Bush plan is quite explicitly designed to shift costs from the more healthy to the less healthy.
The goal of the ACA is to get everyone into a common pool and share the costs, regardless of whether we have good fortune in terms of our health. It doesn't do this perfectly, because there are still choices on coverage levels — consumers who choose gold plans are in a different pool from those who choose silver plans, and so forth — but this is its general direction. The Bush plan would take the country in the opposite direction, making it much easier for healthy people to avoid paying the cost of treating the ill.
In spite of this difference, there is an important area in which the two plans are similar.
Beginning in 2018, the ACA imposes a "Cadillac tax" on healthcare plans that cost more than $10,200 a year for a single individual. The intention of the tax is to discourage plans that cost a lot up front but don't make patients contribute much at the point of service — through copays and the like. That's also what Bush's plan sets out to do by promoting catastrophic insurance with a high deductible.
There are two problems with the logic of this tax. First, the reason most expensive plans are expensive is not the generosity of the benefits; it is the health condition of the participants. Most of the plans that would be subject to the tax have a disproportionate share of older workers with higher medical expenses. So the tax won't primarily punish executives with luxurious, cushy plans; it will punish older workers who are more likely to have health issues.
The other problem with the tax — and the Bush plan — is that it assumes people would seek out more cost-efficient care if they paid for it out of pocket. But new evidence — from a study that came out the same week as the Bush plan — indicates that when people have to pay at the point of service, they often ignore necessary care. They don't just skip frivolous or purely optional treatments; they choose their wallets over their well-being.
Furthermore, they do not do the sort of comparison shopping that economists like to see. People might shop around for clothes or cars; they apparently don't shop around for colonoscopies or mammograms.
So both the Bush plan and the Cadillac tax will transfer costs from the more healthy to the less healthy. Both also rely on a disproven view that patients will be cost-efficient purchasers of medical treatment. Whatever their differences on other issues, Bush and Obama apparently have some common ground on healthcare.
7. Who's Your (Sugar) Daddy?
The Waaaaah Street Factor
by Paul Krugman, The Conscience of a Liberal, nytimes.com, October 14, 2015
Following up on my point about how this is looking like a Dodd-Frank election: to understand what’s going on this election cycle, you really need to know about the dramatic shift in Wall Street’s political preferences.
There was a time when Wall Street was quite favorable to Democrats. Partly this was probably cultural: finance does, after all, center in New York, it tends to be fairly liberal on social issues, and it’s not comfortable with what Ben Bernanke calls the “knuckle-draggers.” Partly it reflects the reality that the economy has tended to do better under Democrats. And for a long time, to be frank, Democrats were all too willing to go along with financial deregulation.
But that all changed in 2010, when Democrats actually pushed through a significant although far from adequate financial reform, and Barack Obama said the obvious, that some financial types had behaved badly and helped cause the crisis. The result was a great freakout — the coming of “Obama rage”.
Wall Street doesn’t like the regulations, which really do seem to have more or less eliminated the implicit too-big-to-fail subsidy. Beyond that, with great wealth comes great pettiness: financial tycoons are accustomed to constant deference, and they went berserk at even the mild criticism they faced.
You can see the result in the chart: a drastic shift of campaign giving away from Democrats toward Republicans. And this will have consequences: if a Republican wins, he or she will be very much in Wall Street’s pocket. If a Democrat wins, not so much.
8. Banks, Regulation, and Glass-Steagall
Structural Reform Beyond Glass-Steagall
by Mike Konczal, nextnewdeal.net, October 14, 2015
Glass-Steagall (GS) has become a central part of the debate over financial reform in the 2016 election. Several commentators have portrayed it as a central objective of financial reform, verging on a litmus test for those who are serious about the topic.
My opinion is that reinstating GS isn’t an important goal for financial reform. I don’t think the story it tells is the one we want to tell, and the reforms it would bring aren’t particularly effective. I think in terms of structural changes, there are better aspirational objectives for the debate to focus on and better options for achieving those objectives. In particular, breaking up the banks through higher capital requirements would meet the same goals while building on the work that has been done—work that is already showing significant success and could use more of a spotlight. Since this is a live debate among financial reformers, I want to explain my thoughts on this topic.
The Case for Glass-Steagall
Let’s start with the case for GS. In doing so, we should separate the role that repealing GS played leading up to the financial crisis from why reinstating GS would be a good idea now. While the repeal is important as a symbol of the deregulation of the time, it isn’t a guide for future policy. I see three broad cases to be made for GS:
The first argument is that when crises do happen, the situation will be far worse without GS. The analogy that I like to use for why the repeal of GS mattered in the 2008 crisis is that it was like keeping oily rags in your house. By themselves, oily rags won’t cause a fire. But if there is a fire, oily rags ensure you have a much bigger problem on your hands than you would otherwise.
There was a wave of mortgage-backed security losses hitting investment banks like Lehman Brothers and Bear Stearns in 2008, which led to the financial crisis. That was bad, and the banks’ quick and sudden failures caused a panic. But when that wave of losses was about to hit Citigroup, which also had hundreds of billions of dollars in deposits, the potential for disaster was much greater. This is in line with Barry Ritholtz’s description of GS repeal as being “not a cause, but a multiplier.” I think this is the right argument to focus on for GS.[1]
The second is that reinstating GS would break up the banks, if not by size then by business lines. This would lead to a less top-heavy financial sector, which would help eliminate Too Big To Fail (TBTF) and weaken the clout of Wall Street.
The third is that GS is a structural change to the financial markets. Restoring it would weaken the political and economic power of the largest banks beyond just making them smaller. This is partly because of a kind of separation of power; a fragmented financial system would be at odds with itself and unable to exert a unified influence on lawmakers and the economy. It is also because GS is self-enforcing, so it wouldn’t require intervention by regulators prone to capture.
The General Case Against
My general thought since the crisis has been that we should be extending the regulatory environment of commercial banking to shadow banking. (Shadow banking here being the funding of assets that are credit-risky and illiquid, traditionally the work of commercial banks, through short-term wholesale funding that is prone to runs.) Shadow banks’ lack of a proper regulatory infrastructure, from consumer protections to a resolution plan, created a panic and a crisis. The goal, then, should be to expand that regulatory structure out into shadow banking while weakening the economic and political power of the largest players.
I don’t think reinstating GS would help with this. If separating investment banking from commercial banking split the regulatory structures, it would be a move in the wrong direction. If it didn’t, it’s still not clear that there would be much to gain for all the energy spent. Let’s get into specifics.
Too Big To Fail
Building on the oily rags/multiplier argument, I think the most promising case for GS that hasn’t been developed is that it is necessary for ending Too Big To Fail. The case for GS is roughly the same case as where it was in 2010, yet whether or not it is feasible to ever actually put a megabank into bankruptcy or an FDIC resolution, allowing it to fail with limited economic chaos, has become one of the central focus points.
This is important because the FDIC’s major policy response, a process known as Single Point of Entry (SPOE), is designed to interject at the holding company level in a way that bypasses the institutional structure. So it won’t matter as much whether investment banks and commercial banks are in the same firm.
SPOE has been oversold, but many people worth noting have applauded it. Sheila Bair has argued that it’s gone quite a bit of the way to ending TBTF. David Skeel called it “quite promising,” which is telling since he wrote a 2010 book which basically argued that Dodd-Frank was like fascism—except worse, because the trains wouldn’t even run on time. (As was the fashion of the time, there was a lot of yelling about Obama’s “corporatism.”)
Around 2013, I tried to find the best case that GS was necessary for a financial firm to go into bankruptcy or FDIC resolution successfully. I couldn’t find a detailed argument, and the arguments I did find were much less compelling than arguments for higher equity requirements or the treatment of derivatives in bankruptcy.
Systemic Change
On the third point, would reinstating GS offer political benefits beyond breaking up the banks? I don’t find the argument that the political strength of the financial sector would be weaker under GS convincing. Some of the most powerful players before and after the crash are predominantly investment banks. Finance has done an excellent job coordinating allies against reform, be they end-users fighting derivatives or generic commercial banks fighting credit and debit card regulations. Worse, rarely has a part of finance stepped up to support weakening another part of finance. The solidarity in finance is amazing. So I don’t see a “separation of powers” in finance being a serious political constraint.
If we are thinking of structural changes as a means of focusing debate, I think there are more promising options to pursue. If we’re reaching, why not reach for derivatives? Banning “naked” credit default swaps, or more generally requiring that a party have an insurable interest in a derivative transaction, would align it with insurance rather than speculation and drain out that part of finance. It would put the focus on wasteful activity that shows no sign of abating.
I also think the “self-enforcing” part is oversold. As this timeline points out, regulators who believed the financial sector could regulate itself had been weakening GS for decades before it was finally repealed. The Volcker Rule, which should also have a clean, demarcated line, shows us that institutional design is essential, and that we won’t be able to escape the necessity of the administrative state.
Breaking Up the Banks
If the goal is to break up the banks, the best way to go about it is by instituting higher capital requirements. We are one serious surcharge on systemically important financial institutions (SIFIs) away from JP Morgan and Citigroup having to size down, just as tightened SIFI scrutiny made GE sell off GE Capital. There’s been significant intellectual work done to move expert opinion and build the case for higher capital requirements, and that work needs to be brought to the public by politicians in this election. So far, it’s not getting that energy behind it.
One of the brilliant insights from the neoliberal political project is that if you want to do something brutal that politics won’t sustain, you have “the market” do it. Can’t destroy Medicare? Turn it over to the market it and give people coupons for it that slowly die out. Then it is seen as a natural outcome, even if “the market” here is just the continuation of politics by other means.
This was the insight on financial deregulation from Greta Krippner’s excellent Capitalizing on Crisis, and we can turn that logic on its head. Higher capital will cause “the market” to break up the banks unless they can justify why they should remain the same size. Proving that they are adding value at their current size would be a high hurdle to clear. It would put pressure on size in a way that politicians, even in 2010, didn’t come close to doing directly. (The amendment for breaking up the banks got 33 votes during Dodd-Frank—nowhere near 50, much less the 60 required to beat a filibuster.)
This is the right path forward, and it’s one that should be front and center in the debates.
[1] I see the case for the multiplier story; however, I don’t see a compelling case for the repeal of GS making the mortgage crisis worse. I don’t see how it was a major driver of subprime mortgages, private-label securitizations, the web of CDS and CDOs, and the subsequent wave of foreclosures. Much of this activity was already exempt from GS. To the extent that someone could put a number on the multiplier effect in these cases, I can’t imagine it would be large.
Indeed, this is one of the reasons we can assume that most of the people peddling stories about the Community Reinvestment Act causing the subprime and foreclosure crisis aren’t serious. As was noted right away, virtually all of this lending took place outside traditional commercial banks that have to comply with the CRA.
FINALLY
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