It was 10 years ago to the day that President Clinton signed legislation that deregulated Wall Street. The Financial Services Modernization Act swept away a law passed in the wake of the Great Depression that had protected consumers by separating investment-banking and insurance companies from the commercial banks that made loans and secured deposits. Then-Congressman Bernie Sanders voted “no.” “This legislation, in its current form, will do more harm than good,” Sanders predicted back in 1999. “It will lead to fewer banks and financial service providers; increased charges and fees for individual consumers and small businesses; diminished credit for rural America; and taxpayer exposure to potential losses should a financial conglomerate fail.  It will lead to more mega-mergers; a small number of corporations dominating the financial service industry; and further concentration of economic power in our country.” Within a decade, the law that swept out safeguards in place since the Great Depression was a major cause of the Great Recession. 

“I wish I was wrong and the supporters of this legislation were right, but look where we are today,” Senator Sanders said earlier this week .  Under the law that deregulated the financial services industry, AIG, an insurance company, was allowed to gamble in risky credit default swaps, leading to a $182 billion taxpayer bailout, for example.  Citigroup, which was allowed to acquire investment bank Salomon Smith Barney, and the Traveler's Group, has received a $50 billion bail-out and a $300 billion loan guarantee from the federal government, Sanders added. “Unfortunately, everything I said over 10 years ago, has proven correct today.”

The huge bailouts -- $700 billion authorized by Congress and more than $2 trillion in secret loans from the Federal Reserve – were justified on grounds that the institutions that were rescued were so big and so woven into the fabric of the economy that they could not be allowed to go under, that they were, in other words, too big to fail.

Now,  Sanders has proposed legislation to make the Treasury secretary identify those institutions that are too big and break them up. “If any of these financial institutions were to get into major trouble again, taxpayers would be on the hook for another substantial bailout.  We cannot allow that to happen.  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.

“In other words, as banks get bigger, consumers are having to pay twice -- once to bail out these financial, and a second time to pay higher fees and interest rates,” he said. “The time has come to do exactly what Teddy Roosevelt did back in the trust-busting days and break these big banks up.”