Senator Bernie Sanders introduced legislation that would break up financial institutions that are too big to fail. "If an institution is too big to fail, it is too big to exist," Sanders said. "We should break them up so they are no longer in a position to bring down the entire economy. We should end the concentration of ownership that has resulted in just four huge financial institutions holding half the mortgages in America, controlling two-thirds of the credit cards, and amassing 40 percent of all deposits." Sanders' legislation 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. The affected financial institutions would include "any entity that has grown so large that its failure would have a catastrophic effect on the stability of either the financial system or the United States economy without substantial Government assistance." Within one year after the legislation became law, the Treasury Department would be required to break up those banks, insurance companies and other financial institutions.
The perilous condition of financial institutions deemed too big to fail played a major role last year in undermining the American economy and driving the country into a severe recession. As Wall Street cratered, taxpayers were put on the hook for a $700 billion bank bailout. Teetering banks also were propped up by at least $2 trillion more from the Federal Reserve in secret loans at virtually no interest.
Since the bailouts and the resulting shakeout on Wall Street, the four largest banks in America (JP Morgan Chase, Bank of America, Wells Fargo, and Citigroup) now have strengthened their domination of the home mortgage and credit care industries. Just five American banks (JP Morgan Chase, Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley) own a staggering 95 percent of the $290 trillion in risky derivatives held at commercial banks. (Derivatives are the risky side bets made by Wall Street gamblers that led to the $182 billion bailout of AIG, the $29 billion bailout that allowed JP Morgan Chase to acquire Bear Stearns, and forced the collapse of Lehman Brothers.)
One result of the burgeoning concentration of ownership has been outrageously high bank fees and interest rates for credit cards, mortgages and other financial products.
"No single financial institution should be so large that its failure would cause catastrophic risk to millions of American jobs or to our nation's economic wellbeing. No single financial institution should have holdings so extensive that its failure could send the world economy into crisis," Sanders said. "We need to break up these institutions because they have done just tremendous damage to our economy."
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To read about the bill and discuss it online at The Huffington Post, click here.
To sign the petition to Treasury Secretary Timothy Geithner, click here.