ROBERT SIEGEL, HOST:
Bernie Sanders has made clear that he believes banks such as Goldman Sachs and JPMorgan Chase have been allowed to grow too large, and he says that if he becomes president, one of his first acts would be to break up the biggest banks. NPR's Jim Zarroli reports the president actually has little direct authority over the banks, and any attempt to break them up would be a complicated process.
JIM ZARROLI, BYLINE: Sanders says that within the first hundred days of his administration, he will have the Treasury Department draw up a list of financial institutions that are too big to fail.
(SOUNDBITE OF ARCHIVED RECORDING)
BERNIE SANDERS: Within one year, my administration will break these institutions up so that they no longer pose...
SANDERS: ...No longer pose a grave threat to the economy.
ZARROLI: But doing so wouldn't be as easy as it sounds. Karen Shaw Petrou of Federal Financial Analytics says the White House actually has no real legal authority to break up the banks.
KAREN SHAW PETROU: It's not something the president can do. It's not even something the treasury can do.
ZARROLI: Banks are regulated by a patchwork of state and federal agencies. The Federal Reserve, for instance, has a lot of direct authority over the biggest banks. If the Fed thinks a bank is doing something risky, for example, it can require it to hold more capital.
PETROU: But that's the Fed. That's not the Treasury, and it's not the president. And the Fed is an independent agency that Senator Sanders, as president, could not tell it what to do.
ZARROLI: And Petrou says Congress did this by design because it wanted to insulate regulators from political pressure. There are other agencies that can generally make life difficult for the banks such as the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency. And there's the new Financial Stability Oversight Council which is often said to have driven GE out of the financial services business. But the president does have a roll. Marcus Stanley is policy director of Americans for Financial Reform.
MARCUS STANLEY: There's a saying in D.C. that personnel is policy, meaning that the people that you appoint are really the ones who determine what the policies are really going to be on the ground.
ZARROLI: In other words, a president may not be able to order a bank breakup, but he or she does get to appoint the regulators. And Stanley says those regulators can be persuasive.
STANLEY: There's no doubt that the regulators have the ability to put tougher rules on the larger banks such that that would create an incentive for the larger banks to break up.
ZARROLI: But even the regulators' power is circumscribed. Karen Shaw Petrou says regulators can highlight problems and demand they be addressed, but before they take steps to lead to a bank breakup, they have to prove the problems can't be resolved in some other way.
PETROU: They could say, we don't like your brokerage operations; we think you need to get rid of them. They can't do it just because they don't like big banks.
ZARROLI: The president can use these regulatory bodies to exert pressure on the banks, says Anat Admati, professor of economics at Stanford. But she says the process wouldn't be as quick or easy as Senator Sanders suggests.
ANAT ADMATI: It's all just very slow and very cumbersome, the things he can do. But it's not a clear order from today to tomorrow or anything like that that would just do this thing called breaking up the banks.
ZARROLI: It's also true that banks have enormous lobbying power in Washington, and they can be counted on to vigorously oppose any effort to break them up, no matter what the president wants. Jim Zarroli, NPR News.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.