WASHINGTON, April 26 – As the Senate considers new rules for the nation’s financial institutions, Sen. Bernie Sanders (I-Vt.) said today that breaking up big banks is critical to meaningful reform.
“One of the major components of any serious Wall Street reform has got to be breaking up the largest financial institutions in the country. The time has come to do exactly what Teddy Roosevelt did back in the trust-busting days and break up these huge financial institutions,” Sanders said.
Sanders said the giant financial institutions must be dismantled not only to protect taxpayers from future bailouts, but because the concentration of ownership in the financial sector is leading to fewer choices, higher bank fees, and higher credit card interest rates.
“Not only are too big to fail financial institutions bad for taxpayers, the enormous concentration of ownership in the financial sector has led to higher bank fees, usurious interest rates on credit cards, and fewer choices for consumers,” Sanders said.
Sanders said three out of the four biggest American banks – Wells Fargo, JPMorgan Chase and Bank of America – are larger today than they were before taxpayers bailed them out as the economy collapsed in 2008. Combined with Citigroup, the four largest U.S. banks now write half of the mortgages, issue two-thirds of the credit cards, and hold $7.4 trillion in assets, more than half the nation’s economic output.
Just last week, in a strong signal of the growing momentum behind proposals to dismantle financial institutions that dominate the U.S. economy, the Senate Budget Committee narrowly voted 12 to 10 against a Sanders amendment on breaking up big banks.
Last Nov. 6, Sanders introduced the “Too Big To Fail; Too Big To Exist” Act that would give Treasury Secretary Timothy F. Geithner 90 days to compile a list of commercial banks, investment banks, hedge funds and insurance companies that he deems too big to fail. Within one year after the legislation becoming law, the Treasury Department would be required to break up those banks, insurance companies and other financial institutions identified by the secretary. Sanders is also co-sponsoring an amendment with Senators Brown and Kaufman to the financial reform bill that would break-up the six largest financial institutions in the country.
Simon Johnson, the former chief economist of the International Monetary Fund and currently an economics professor at MIT, has tracked the big banks’ growing concentration. “As a result of the crisis and various government rescue efforts, the largest six banks in our economy now have total assets in excess of 63 percent of GDP (based on the latest available data). This is a significant increase from even 2006, when the same banks’ assets were around 55 percent of GDP, and a complete transformation compared with the situation in the United States just 15 years ago, when the six largest banks had combined assets of only around 17 percent of GDP,” according to Johnson.
In addition to breaking up big banks, Sanders has said financial reform legislation should cap credit card interest rates, end Federal Reserve secrecy, separate financial institutions’ gambles on derivatives so any losses would not be covered by federal banking insurance, and reform Wall Street to support job-creating small and medium-size businesses starved for affordable credit.