Senator Bernie Sanders has introduced a bill to break up the “too big to fail” banks and some liberals are all a-flutter.
Go Bernie– & drive this into campaign & debates/ Sanders unveils bank breakup legislation http://t.co/yUlBYM9n9w
— Katrina vandenHeuvel (@KatrinaNation) May 7, 2015
For me, this is one of those moments when, as a pragmatist, I part ways with some of my friends on the left. It’s true that the title hits a note that many have been wanting to hear: Too Big To Fail, Too Big To Exist Act. But I have to wonder if any of these folks have actually looked under the hood to see what’s actually in the bill. Don’t worry, it’s not a bunch of long drawn-out legalese. As a matter of fact, in taking on one of the most complex entities in our economy, it’s only four pages long.
The bill requires the Treasury Secretary to make a list of “too big to fail” institutions. That’s pretty easy because the list already exists as a result of the requirement in Dodd/Frank to identify “Systemically Important Financial Institutions” (SIFI’s). And then here’s the sum total of what the bill says should be done from there:
Notwithstanding any other provision of law, but not later than 1 year after the date of enactment of this Act, the Secretary of the Treasury shall break up entities included on the Too Big To Fail List, so that their failure would no longer cause a catastrophic effect on the United States or global economy without a taxpayer bailout.
Other than that, the bill excludes “too big to fail” institutions from being able to access Federal Reserve and FDIC funds – which completely ignores the fact that Dodd/Frank gave the government the power to put these institutions into receivership if another crisis occurs.
But the part of the bill that breaks up “too big to fail” is not a serious proposal. If Sanders had been serious, he would have simply announced a re-introduction of Senator Sherrod Brown’s SAFE Banking Act. That’s because Sen. Brown went to the trouble of actually looking into the issue and crafting a solution to a complex problem.
Sen. Sanders’ bill will likely get him the attention he needs from a lot of progressives for his presidential campaign. There’s something to be said for that. But I’ll tell you one group that isn’t worried about this bill…”too big to fail” banks. That’s because they know exactly what it is meant to do/not do.