Time to Break Up the Biggest Wall Street Banks
Robert B. Reich
TARP, the infamous Troubled Assets Relief Program that bailed out
But it's not really over. The biggest
The biggest banks keep getting bigger because they can borrow more cheaply than smaller banks.
That's because investors believe the government will bail them out if they get into trouble, rather than force them into a form of bankruptcy (as the new Dodd-Frank law makes possible). This belief itself -- a virtual federal guarantee -- is worth billions to the big banks. It makes dealing with them less risky.
And the belief is correct. No president will allow a
To make matters worse, with bigness comes more political clout. The biggest banks on
So now that TARP is over, shouldn't we make absolutely sure we don't need another
That's why it's necessary to limit their size and break up the biggest. There's no alternative.
Impossible, you say? The banks are so big and powerful they'll prevent any attempt to break them up.
Yet there's reason to think
"This approach has the advantage of tying the limitation on growth of financial firms to the growth of the national economy and its capacity to absorb losses," said Tarullo, "as well as to the extent of a firm's dependence on funding from sources other than the stable base of deposits."
Meanwhile, the Fed has put the big banks on notice it will no longer allow them to buy up other banks.
The move to break up the big banks is gaining support in some unlikely quarters. Even former titans of
Weill said he thinks banks will be more profitable once broken up and that the markets would function better.
Weill was one of the champions of bank deregulation. Yet when
The new chairman of the
Over in the
In other words, the timing is right. The oven is ready. All we need is another multibillion-dollar banking loss due to bad bets -- like
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Time to Break Up the Biggest Wall Street Banks | Economy
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