An End to 'Too Big to Fail'

Last Friday, Sen. Bernie Sanders (I-Vt.) introduced legislation that would make the Treasury Department identify and break up financial institutions that are "too big to fail."

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 identified by the secretary.

"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."

Not that there's any chance this bill will pass, but it's good to see the conversation getting rekindled.

Some will dismiss this proposal as "socialism." Although Sanders does describe himself as a socialist, he's not proposing socialism in this case. The "socialist" solution to an unmanageable banking system would be to simply put these entities under direct government control. Breaking up monopolies so that competition can flourish is in the best tradition of U.S. capitalism.

Read the entire bill (it's only three paragraphs) or Sanders' press release for more details.

Comments

[mopacman:]

While I may appreciate the political value of such a proposal, students of financial history will note that it is much easier (meaning, actually possible) to step in and shore up the anchors of a financial system than it is to save thousands of companies when there is systemic panic.

Nov 11 06:05 AM

[ain't no fo...:]

Alan, thanks for bringing this topic up. I spend half the year in VT and yes, Bernie is a "socialist" (so what, after what we've experienced the past few years?) but this goes beyond politics - its common sense for crying out loud. I put a link to the Bill and the following on my Facebook page the other day and urge anyone interested to do likewise:

Too Big to Fail = Too Big to Exist! Senator Bernie Sanders (VT) has a petition for Treasury Secretary Geithner asking that the "TBTF" banks that caused the near destruction of the world's financial system in September 2008 be "downsized" and broken apart so they cannot threaten the world financial system with systemic meltdown again, or blackmail US taxpayers with threats of such an event in order to extort more free taxpayer money from us. The concentration of financial and POLITICAL power in their hands is terrifying, and they are already pulling the same stunts that we spent TRILLIONS bailing them out for just one year ago! I am a big supporter of this petition, and I ask that you consider taking a moment to sign it and let our government know how you feel about the menace these banks hold for us, our children, our grandchildren. Thank you,

Nov 11 08:26 AM

[john s. gordon:]

mr. sanders has the right idea.
but common sense does not necessarily prevail over big $.
in today's political context anyone who is at all concerned about the rights and interests of the common man and objects to getting run over by the corporate steamroller gets tarred with the label 'socialist'.
> jack

Nov 11 10:02 AM

[ain't no fo...:]

meanwhile the ones doing the steamrolling are the ones getting the biggest government bailouts as a reward for their failure to survive on their own in a capitalist system


On Nov 11 10:02 AM john s. gordon wrote:

> mr. sanders has the right idea.
> but common sense does not necessarily prevail over big $.
> in today's political context anyone who is at all concerned about
> the rights and interests of the common man and objects to getting
> run over by the corporate steamroller gets tarred with the label
> 'socialist'.

Nov 11 12:18 PM