A strong investment community is essential to a strong economy, but, when those investment practices get out of hand, the result comes back to hurt everyone—rich and poor. Despite the anti-Wall Street rhetoric we have seen on the campaign trail, Bernie Sander's policies are truly designed to protect the economy as a whole, including Wall Street. The heads of Wall Street's banks are not looking forward to a repeat of the Great Recession, and Sanders' proposals are designed to address that issue.

The financial sector has always been regulated, and for good reason. Much of the significant legislation around banking regulations can be traced back to the months and years following the Great Depression, when President Franklin Delano Roosevelt passed laws that would protect the American people from another economic disaster of that magnitude. In looking at Sanders' proposals, the main policies around this issue seem mostly designed to turn back the wave of deregulation that contributed to the 2008 financial crisis and also to put protective measures into place that are better adapted to the current financial climate.

Now, let's look into Sanders's three main proposals for tackling Wall Street and banking reform—reinstating Glass-Steagall, imposing a financial transaction tax, and breaking up banks that are too big to fail.

Glass-Steagall

For those of you who do not keep up with early 20th century banking legislation, Glass-Steagall refers to the provisions in the U.S. Banking Act of 1933 that separated commercial and investment banking. These provisions were repealed in the Gramm–Leach–Bliley Act of 1999, and that repeal has been cited by prominent economists like Joseph Stiglitz as contributing to the magnitude of the 2008 crash. This repeal was also concerning for two other reasons: 1. It exposed consumers to the risk of losing their money in a market that they did not choose to enter, and 2. The federal government still insures consumer deposits for up to $250,000 per person. This means that banks can gamble your money on the stock market with the reassurance that the government will cover them whenever things go south.

Senator Sanders wants to reinstate Glass-Steagall in order to separate commercial and investment banks, and really give consumers a choice of whether they want to enter into a risky investment atmosphere or whether they want to simply go to the bank as a place to put their money. For more info, the full text of the bipartisan 21st Century Glass-Steagall bill, which Sanders would likely usex to implement this reform, can be found here.

Financial Transaction Tax

So, you may have heard that Bernie Sanders will pay for free tuition at public colleges and universities by imposing a "tax on Wall Street speculation." This would basically consist of an FTT, or financial transaction tax, that if similar to representative Keith Ellison's plan in the proposed Inclusive Prosperity Act would impose a 0.5% tax on stock trades, a 0.15% tax on bond trades, and a 0.005% tax on derivatives.

This is actually a concept that's actually much less controversial than you'd think. Back in 2011, a group of 1,000 economists, including Nobel Prize winners Joseph Stiglitz and Paul Krugman, penned a letter to the G20 advocating for member countries to implement FTTs. This type of a tax has been widely hailed as a way to counteract the growth of speculative day trading caused by advances in computer technology and also a way to raise a great amount of revenue for the federal government. Considering how much the federal government spent bailing the big banks out after the 2008 crash, this is a reasonable measure that Sanders has found widespread support for.

Breaking up Big Banks

"You have three out of the four largest financial institutions in this country bigger today than they were when we bailed them out because they were too big to fail" - Bernie Sanders during the PBS Newshour Debate

When the crash happened in 2009, those banks that were too big to fail needed to be bailed out in order to save the economy. In order to avoid putting the government in that situation again, Sanders', along with 170 economists, has supported breaking up banks that are "too big to fail." To be clear, without any changes to the current system, the next major financial crisis would most likely force the government to either bail the banks out again or let them fail and take the economy down with them. Big banks need to be broken up.

Conclusion

In the politics surrounding the financial sector, opinions are often wrongly split among class lines. Bernie Sanders' supporters are accused of scapegoating Wall Street, but the reality is that the senator is one of the few who has put forth policies that would protect the economy as a whole and protect against a second Great Recession. On an issue too often ruled by big money interests and backroom lobbying, both his supporters and detractors will agree that Bernie Sanders can be a refreshing exception to the sort of corruption that stands in the way of much-needed reform.

Remember to like, comment, share, and check out Bernonomics: Part One for a discussion on the minimum wage!