Senator Seeks to Break Up Banks ‘Too Big to Fail’
Senator Bernard Sanders, the Vermont independent, is taking aim at banks that are considered too big to fail. He introduced legislation on Friday that would force the Treasury Department to break up all financial institutions whose failure could cause a major disruption to the nation’s financial system.
“If an institution is too big to fail, it is too big to exist,” Mr. Sanders said in a statement. “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.”
The four banks cited by Mr. Sanders are Citigroup, Bank of America, Wells Fargo and JPMorgan Chase. Three of those banks have made major acquisitions as a result of the financial crisis. But Citigroup, which received a $45 billion government bailout, is in the process of selling off nonbanking assets.
Mr. Sanders’s 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 or “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.
The bill has no co-sponsors, but Mr. Sanders told DealBook that support would be coming. “I have talked to a number of senators and I think that there will be support,” he said.
But Mr. Sanders acknowledged that he had yet to talk to Senator Christopher J. Dodd, the Connecticut Democrat who is chairman of the Senate Banking Committee and set to introduce the Senate’s version of the financial overhaul bill next week.
American banks have argued that they need to be large to compete with other big banks overseas. They contend that the larger the bank, the greater its ability to back major projects around the world. But Mr. Sanders is no longer buying that argument.
“I have heard that lie for 16 years,” Mr. Sanders said. “They were wrong. We deregulated them, and they caused the greatest financial crisis in the modern history of America.”
“Goldman Sachs has done irreparable harm to this economy,” Mr. Sanders said. “Let them gamble without any support from the federal government. That they are getting insured” — through implicit government assurances — “is beyond comprehension.”