For the last 12 months, Bernie Sanders has been trash-talking bankers and other wealthy dealmakers through a megaphone. They’re getting sick of hearing it.
I asked Anthony Scaramucci, founder of the hedge fund Skybridge Capital, what he’d say to Bernie Sanders if given the opportunity. “I’d say, ‘please move to Cuba,’” Scaramucci tells me in the video above. “Spend a year in Cuba. You can recognize it’s a completely failed state — 58 years of failed socialist policy and statism.”
Sanders, the pugnacious Democratic presidential contender, doesn’t quite advocate Cuban-style socialism as an antidote for America’s economic problems. He doesn’t call for the government takeover of most industries, for instance, or central planning in the old Soviet fashion.
But he does want to “break up the banks” (whatever that means), hike taxes on the wealthy, kill free-trade deals, make college free and boost the minimum wage to $15. Sanders calls himself a “democratic socialist” rather than an outright socialist, but the distinction is often lost among those in Sanders’s crosshairs.
Sanders argues that the biggest U.S. banks – J.P. Morgan Chase (JPM), Goldman Sachs (GS) and so on – are a threat to the U.S. economy because a handful of firms control too much wealth and might take down the whole financial system if one of them failed. But the Dodd-Frank reforms passed in 2010 have reduced risk-taking at banks and cut into profitability.
Scaramucci argues against the idea of forcing Wall Street banks to shrink. “I think our banks need to be big to stay competitive in the global landscape,” he says. “It would be disheartening to break up the banks, then find the largest banks with the most scale being in China or places like Europe.”
Sanders isn’t the only politician who needs convincing. Republicans Donald Trump and Ted Cruz haven’t echoed Sanders’s call to break up the banks, but they have attacked various aspects of the financial industry, such as the “carried interest” tax break for private-equity firms and the light regulation hedge funds enjoy, compared with banks that take deposits. Meanwhile, Neil Kashkari, president of the Federal Reserve Bank of Minneapolis, has joined Sanders’s crusade to shrink the big banks, and even Hillary Clinton has moved to the left on issues such as free trade.
Taking rhetorical cracks at the financial industry isn’t the same thing as passing new laws or regulations meant to constrain it. But it’s a step in that direction. The question for banks is whether anti-Wall Street sentiment will be strong enough once the next president takes office to trigger a new onslaught of legislation further reining in the banks.
“It scores a lot of political points,” Scaramucci says of the bank bashing. “They’ve tapped into the politics of envy, of class division … which I think is sort of unfair.” Voters get their say in seven months.
Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.
- Financials Industry
- Bernie Sanders
- Anthony Scaramucci