Economy & Work

What Voters Need to Know About Wall Street and Economic Policy

Mike Konczal, a financial-engineer-turned-popular-progressive-blogger, offers his views on the 2008 financial meltdown and the ways in which it changed both political parties.

What Voters Need to Know About Wall Street and Economic Policy

Hillary Clinton and Bernie Sanders at a campaign rally at the University of New Hampshire on September 28, 2016. (Photo by Justin Sullivan/Getty Images)

As part of our election series focusing on the 2016 political issues that have been underreported by the mainstream media, we talked with Mike Konczal about the economic policy positions of the two presidential candidates.



When the financial crisis struck in 2008, Mike Konczal was not the well-known policy wonk he is today. He was neither an economist nor a journalist. He was a financial engineer working in San Francisco’s Bay area who started blogging in his free time, writing about the unfolding financial calamity that would reshape economies worldwide. “I knew a lot about a specific part of it, and I knew a little about other parts,” he says.

Mike Konczal

Mike Konczal

Less than a decade later, he is one of the most widely published policy voices on the left, writing for The Nation, Vox, Dissent, Rolling Stone, The Boston Review, Jacobin, The New Republic, The Atlantic, Washington Monthly — to lay out an incomplete list — as well as his own blog. Shortly after Konczal started blogging, he joined the Roosevelt Institute, a progressive think tank that was beefing up its staff as a legislative response to the crisis wound its way through Congress. “I thought ‘I’ll take a year, I’ll do some stuff that’s reform related,’ and it just picked up and I kept going with it,” Konczal says. “It has been working out since.”

Though the Roosevelt Institute may not be a household name, Konczal and his colleagues have had a big impact on the American dialogue. The think tank’s chief economist is Nobel-prize winner Joseph Stiglitz, whose 2012 book The Price of Inequality helped inspire the slogan for the Occupy movement: “We are the 99 percent.” The Institute is credited for quietly influencing the Clinton campaign’s thinking by pushing progressive policies on a wide range of issues from racial justice to trade, higher education to the regulation of shadow banking. Many of the think tank’s policy papers repeat a version of the same phrase: “Rewrite the rules.” The phrase must have had a ring to it. “In an unexpected turn of events, Hillary Clinton’s economic agenda now stands as a correction of sorts to her husband’s,” wrote Jonathan Cohn in a deep-dive Huffington Post article examining Clinton’s policy agenda and the people behind it. “In speeches, Clinton often says that it’s time to ‘rewrite the rules’ of capitalism — language injected into the debate by the Roosevelt Institute.”

We spoke with Konczal recently about the presidential election, the ways in which the Democratic Party has changed in the wake of the financial crisis and the latest aggressive push by Republicans to peel back post-crisis financial regulations. This interview has been edited for length and clarity.



John Light: If you could ask a question of both candidates at the debate, what would it be?

Mike Konczal: That’s a good question. I’d want to ask so much.

One thing I’d want to ask: “Do you think inequality is a problem, and if so, what kind of problem is it?” I’d be really interested in seeing how they both respond to that. If I could do a third part to that question, it would be, “What kind of solutions would you like to see?”

The way you think about the way the economy is working and not working for people sets up a lot of other things. A lot of policy comes from the way you formulate the problem and the way you understand the problem. If Donald Trump thinks that the real problem is trade deals and immigration while Hillary Clinton thinks the real problem is unaffordable health and child care and runaway CEO salaries, it’s two different worlds, even though they both may care a lot about inequality and what’s happening to American workers.

Light: You say there are many things you’d like to ask. What’s a second question?

Konczal: The Economist and The Atlantic are running big stories about increasing consolidation and the huge market shares of our biggest companies, even arguing that we have a monopoly problem, like we did in the 1880s and 1920s. I’d ask: “Does this worry you and, if so, what would you do about it?”

I think there’s a greater realization that corporate concentration is not just big in some industries — we think about finance, telecoms — but across everything: across diapers, across mattresses. A lot of people are writing about it, thinking about it.

As opposed to a lot of people, I think Donald Trump has a really clear policy agenda.

— Mike Konczal

And then I’d want to ask what Donald Trump really thinks about Dodd-Frank and what he’d do about it. I’d ask both candidates that. But the Democratic primary was very focused on financial reform. It was where Bernie and Hillary Clinton both disagreed strongly. They ironed that out. But I think the Republicans have put forward a very extreme agenda in the CHOICE Act [aimed at rolling back Dodd-Frank].

Light: That’s Rep. Jeb Hensarling’s bill?

Konczal: Yeah, Jeb Hensarling’s thing. And it’s not just that it’s less government or more favorable to business. It’s very extreme. It reworks the Fed in complicated ways. It gets rid of the Chevron Doctrine. It puts a lot of hurdles on making any rules. I think it would really be bad.

But, as opposed to a lot of people, I think Donald Trump has a really clear policy agenda. He’s very clear that he wants to come down hard on immigration, come down very hard on trade deals and thinks we do too much in the world. And I think a lot of the other stuff he has just kicked off to the House. Like his tax plan. He was clearly given The Wall Street Journal editorial page and was like “do this for me.”

It’s really interesting to wonder if Donald Trump wants to end Dodd-Frank and wants to bring back Glass-Steagall, which was hinted at. Chris Christie in private tells financial firms that they should get behind Trump because he’ll be good for them. I don’t know. That’s one issue I watch very closely and I just simply don’t know.

Light: Yes, what do you make of the fact that the Republican Party platform has this thing about re-implementing the Glass-Steagall Act?

Konczal: It’s one of those things where no one takes credit for it, as far as I know. People don’t know how it got in there. Kind of like the Russia stuff. As far as I know, and I’m 99 percent sure on this, Donald Trump has never mentioned it. Furthermore, no one mentioned it on stage at the RNC. If it was a real priority, presumably someone would say so.

So I do not expect much from that. You know, Sen. McCain and Sen. Warren have had a bill for awhile. There’s not been a lot of Republican support for it. So it’s not like a bubbling Republican priority that just hasn’t hit mass yet.

If Donald Trump meant it, but he also meant getting rid of Dodd-Frank, you would create an environment where you would have a lot of free-floating investment banks that have been spun out of Goldman, Citi, JPMorgan. You would have a bunch of brand new investment banks that were created by splitting them off. However, you’ve gotten rid of Dodd-Frank. So you couldn’t regulate their capital requirements. You couldn’t have much hold on their derivatives markets. And you’ve gotten rid of consumer protection. So that is literally the environment of 2007, which I think we think was a bad environment to be in.

Light: What narrative should we be telling ourselves about the way we responded to the financial crisis? New threats have since emerged in the financial system since then — but have we responded to the 2008 crisis well, or is there still more work that we should be doing?

Konczal: I think two things: There’s the stuff that lead up to the crisis. And you don’t want to just respond to the last crisis, but it’s clear the kinds of channels that were broken. Consumer protection was broken in a very specific way because it was the third priority at 12 different places, which meant that it was no one’s priority. So insuring that you have a dedicated single regulator that is well-funded to do that work became very important. We did that with the Consumer Financial Protection Bureau (CFPB). Seeing the way panics kind of explode out through the derivatives market, through poorly capitalized banks, through poor transparency, through really big institutions — I think we’ve made some steps toward containing that.

There’s a lot of work that had to be done that’s been done, I think that’s given us a template to go further. Capital requirements are working; we could make them larger. Derivatives clearing is strong; we could make it stronger. There’s a big debate about resolution authority but it could conceptually work. Rationalizing firms to make sure that they’re able to be taken down in case of failure — that’s really the power that we have. I think the mechanisms Dodd-Frank gives us are a good starting place that we can push on.

And I think you want to look at broader activities than just institutions. I think a lot of Dodd-Frank is very institution-focused because we have a lot of big investment banks and commercial banks that are ignoring people. But looking a little more simply at financial activities is where you get a lot of the shadow-banking conversations. For example, the act of lending, independent of the institution, can create kinds of panics and contagion and information problems that we know about really well. So you might want to regulate that in a broader way.

I think many Democrats were in a better place to be like ‘Oh, wow, the crisis was really screwed up. We need to change what we think about this. We need to have tough regulations.’

— Mike Konczal

I think that’s where the momentum needs to go, at least among liberal economists. I think conservatives are not on this vein. I think they have a wrong view of what happened in the crisis. In their view, it was about the community reinvestment act and affordable housing goals, which most serious people have not found to have real explanatory power. But it’s still the driving force of their narrative.

Light: What do you think accounts for that? That these two very different narratives exist?

Konczal: We associate financial deregulation with Democrats, because we think about Bill Clinton moving to the center on a lot of stuff and getting rid of the Glass-Steagall Act. And starting even under President Carter, a lot of commercial banking regulations were pulled back. So we often think of deregulation as a centrist, kind of neo-liberal thing.

But it was a real big conservative priority. I think many Democrats were in a better place to be like “Oh, wow, the crisis was really screwed up. We need to change what we think about this. We need to have tough regulations.” And where that lands is a big fight, as you know.

Republicans, for whatever it’s worth, were not ideologically in that same position to do that same thing and if anything they were off center and are now pushing even further, saying, “actually the financial sector had nothing to do with the crisis because it was all big government.” We have Peter Wallison, who is very influential on the right, saying the movie The Big Short was fantasy — [that it] was make believe. He’s the guy who was the inspiration for Jeb Hensarling’s plan which could be the rule of law in February. I have a lot of problems with The Big Short, but to say it is a work of fiction is dangerous. It’s really off center. It’s very extreme. And that really worries me.

Crucially, all the people in George W. Bush’s orbit who lived the crisis in real time in 2008 have disappeared from public view. [Former Treasury Secretary] Hank Paulson is not around giving speeches about “here’s the parts of Dodd-Frank that are good.” Maybe it’s because George W. just went down the memory hole, but even the people from back then who were well primed to be fair interlocutors of this stuff are gone and they’re replaced with people who are super polarized and super anti-Obama.

Light: You say the Democratic Party has reversed its position post-crisis from where it was in the ‘90s. How full is that reversal? Are most Democrats now on the same page?

Konczal: I wrote a big thing for Vox about this — I think the Great Recession, and a lot of things that came with it, has reset a lot of thinking. One example is our much better understanding of, and worries about, the raw fact of inequality, which comes from the work of Thomas Piketty and Emmanuel Saez.

We now see more concern about secular stagnation — the idea that the economy will not always take care of itself. Secular stagnation is really complicated, a lot of people fight about it, and in that Vox piece they hated me even bringing it up. But, crucially, the idea is that a lot of the ’90s thinking is a little bit predicated on the idea that if you want a job you can get a job. That’s definitely the idea behind welfare reform. That’s definitely the idea behind the real focus on skills and education as the fundamental solution. Our economy is pretty good right now, but if we have another recession, we’re in a lot of trouble.

Light: You’re talking about something on the scale of what we saw in the last decade.

Konczal: Yeah, or even if we had a mild recession, like in the late ‘90s, the Fed really can’t do a lot. People are very worried about it in a way that changes the dialogue. It’s like, “man, maybe not everyone can get a job.” Or “maybe inequality is not this thing that comes and goes but is real entrenched in our market and the way it’s set up.”

I think Democrats are also feeling very viscerally the strengths and weaknesses of Obamacare. It’s done a whole lot of good, but man is it vulnerable to what the private insurers want to do in a way that is tough to mitigate and in a way that the Medicaid expansion is not. The Medicaid expansion — the courts and the conservative governments have stopped it in a lot of places but where it’s been allowed to happen it’s going great. So Obamacare made the strengths and weaknesses of the kind of nudge approach, and working through private markets, very visceral.

If you take Hillary Clinton’s plan, there are no unprogressive priorities in it, really. There’s no debt scaremongering. And there’s a lot of great ideas in there: expanding Social Security, building on financial reform, a public option, free college, which came from Bernie’s campaign. I think there’s a lot of really positive things.

Light: If we have another Democratic administration, how do you think the revolving door should be addressed?

You could imagine a lot of dedicated public servants in the Obama administration who just don’t want to fight any more fights with the financial sector, who think Dodd-Frank’s it, the problem’s solved and we’re done, and that would be really bad.

— Mike Konczal

Konczal: [Sen.] Tammy Baldwin has a very strong bill of which I’m not qualified to talk about the specifics because I don’t know it that well. But I do know that it’s a bill Hillary Clinton has endorsed, Bernie Sanders has endorsed, Elizabeth Warren is also behind. So it has a really good pedigree.

One thing to remember about the crisis — and this isn’t always on point, but — [Commodity Futures Trading Commission Chair] Gary Gensler turned out to be a good regulator, though a former Goldman Sachs guy. And many progressives were not happy with [Treasury Secretary] Timothy Geithner even though he was a career public servant. Gensler came in understanding that there was a big problem in the derivatives market and wanted to solve it aggressively.

I think the problem you’re trying to solve matters just as much as your past experience. You could imagine a lot of dedicated public servants in the Obama administration who just don’t want to fight anymore fights with the financial sector, who think Dodd-Frank’s it, the problem’s solved and we’re done, and that would be really bad. Or you could imagine a lot of banker types who are like “actually, there are still big problems in finance and we’ve got to go after them.”

So, when I’m thinking about people, I’m thinking about what they want to do and how they see the problem. Obviously experience matters a lot, but, fundamentally I think it’s about whether or not you want to pick the fight and do the work.

Light: What are some things you wish the Obama administration had gotten done and that you hope the next president acts on quickly?

Konczal: I want to make sure that there’s a full-court press on Wells Fargo. I think that it’s really important to have the Securities and Exchange Commission look at securities fraud, have the Department of Justice look at criminal charges. I think the Consumer Financial Protection Bureau did a good job, but we should understand that as the opening move in trying to have accountability for a lot of these high-stress, high-pressure tactics that bosses put on workers. That’s one thing that is very relevant right now that I’m thinking about — and I hope that action is taken before Obama’s term is out.

Light: How did you feel about the recent Census report showing a leap in household income? Did that take you by surprise at all?

Konczal: I’ve not spent a ton of time with it, but I think one thing that’s worth noting is that 2013 and 2014 were not great years. It’s not like a good thing got even better. It’s that a really slow recovery finally showed some signs of life. I’d say a big thing to remember that’s important for liberals who have been wanting good news for a long time is that in some ways we’re finally getting back to where the economy was in 2005. But 2005 sucked. Everyone was mad about 2005, and income levels have finally gone back to 2005. Even though we’re richer, this is not great news. And it explains why a lot of people are frustrated with the pace of the recovery and the pace of income growth. And I think that’s an important dynamic to remember about the Census report.

A second thing to take away that I think is important is: This is what happens when there are fewer headwinds. When we’re not shooting ourselves in the foot by laying off a lot of state employees and not rehiring them, or doing the sequestration, or, most importantly, when the people at the Federal Reserve are not trying to normalize rates too aggressively. We are finally letting the economy have some space to grow.

The long-term unemployed are coming back from being out of the labor market. These things are real and they’re happening and they could continue to happen if we let them.

Light: We’ve been circling the issue of Republicans getting rid of Dodd-Frank. Can you lay out the stakes for Americans like Jeb Hensarling’s voters, and Trump voters, if this law is rolled back? What would that mean for them? What would that mean for the American economy?

Another period of prolonged unemployment I think would do really terrible things to the character of our country in scary ways.

— Mike Konczal

Konczal: It’s an important question: We talk a lot about capital ratios and derivative clearing houses and it doesn’t hit people where their pocketbook is, and doesn’t hit the way they live their lives. It is abstractions, or it is a far away thing.

This would mean a few big things. The ability for consumers to have a cop on the beat, someone who is looking out for their interests, would be severely limited by either weakening the structure of the CFPB or getting rid of it outright. There are a couple of different plans.

Light: Right, such as putting a bipartisan panel in charge of it.

Konczal: Right. But the big thing is weakening their funding. I think that would be very significant. If you look at the CHOICE Act specifically, it would do things like make it very hard to write rules for the financial sector. The financial sector is always changing, you need to keep up with it, and that would be very hard to do. It would, crucially, make people’s pocketbooks weaker because actual protections for, like, Wells Fargo’s customers would become much weaker. I think the financial sector would run much hotter and much riskier, much more prone to booms and busts in a way that should scare us.

And another period of prolonged unemployment would do really terrible things to the character of our country in scary ways. And so I’m opposed to this plan, I think it’s a really bad bill. And I think people should understand that it’s not “Dodd-Frank did this and so we’re going to pull it back here” — the sort of give and take of partisan politics. It’s something real extreme that goes in a very different direction from what I think people would want.

Light: Do you see it as ideologically motivated? Or is it the result of a decade of bank lobbying?

You have ideological accelerant added to the bankers’ self-interest. They amplify each other greatly. They don’t check each other at all.

— Mike Konczal

Konczal: It’s both. There’s a lot of stuff that’s clearly a giveaway to the bankers. I don’t think people are, like, clamoring for banks to be able to charge merchants more for credit and debit card fees, which is one of the central planks of this bill. That seems a little industry motivated.

But I think it comes from an ideological place, though there are obviously a lot of industry fingerprints over all of it. It’s fueled by an ideological commitment to the idea that the entire crisis was the government’s fault, and that banks had no real role in it, and that we didn’t really need big reform.

And that adds fuel to the fire. You have ideological accelerant added to the bankers’ self-interest. They amplify each other greatly. They don’t check each other at all.

Light: What is a book that you would hope people read before making their decision on how they’ll vote?

Konczal: Sarah Jaffe’s Necessary Trouble is a great book. We get very focused on political action, but the book is about all of the activism and energy that is happening on the ground right now, and the way it is interconnected and the way it is all tied into social justice and economic justice. I feel like a Democratic president is a useful person that pressure can be brought against, because obviously the Democrats want younger voters and they want left voters, whereas a Republican president would extinguish a lot of that energy.

The idea of activist groups pushing an administration that wants to work with them, or an administration that wants to keep them happy enough to not cause trouble — even though the trouble is necessary, as Jaffe puts it — is really interesting and really promising. I think we’re on the cusp of some real changes that could happen in the next 10 years, but electing a far-right candidate would be very damaging to it and put us very far behind.

John Light


John Light is a reporter and producer for the Moyers team. His work has appeared at The Atlantic, Grist, Mother Jones, Salon, Slate, Vox and Al Jazeera, and has been broadcast on Public Radio International. He's a graduate of Columbia Graduate School of Journalism. You can follow him on Twitter at @LightTweeting.