Sen. Bernie Sanders, I-VT, thinks it’s long past time for the nation’s six biggest banks to be broken apart.
Back when he was a candidate for president, Sanders set his sights on Wall Street and called for sweeping reforms to the nation’s financial system, including breaking up the big banks. In fact, Sanders pledged that within his first 100 days in office, he’d direct the Treasury Department to establish a “too big to fail” list of big banks and move to break those banks up because the banks’ sheer size posed a “grave” risk to the nation’s economy.
Sanders, of course, didn’t become president, but that’s not stopping the Vermont senator from taking aim at the big banks again.
On Wednesday, Sanders announced that he is introducing the “Too Big to Fail, Too Big to Exist Act,” which would break up JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley.
According to details published by Sanders’ office, those six banks control assets equal to more than half the country’s gross domestic product, while the four largest banks (JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup) are, on average, approximately 80% larger right now than they were before government’s financial crisis bailout.
Sanders’ bill would place a cap on the size of the nation’s largest financial institutions, which would limit a company’s total exposure to no more than 3% of GDP, approximately $584 billion, based on current figures.
Under the bill, financial institutions that are over the 3% threshold would have two years to restructure until they are no longer “too-big-to-fail.”
These massive companies would also no longer be eligible for a taxpayer bailout from the Federal Reserve and could not use customers’ bank deposits to speculate on derivatives or other risky financial activities, Sanders’ office said.
Under those conditions, JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley would each be reduced in size significantly.
According to Sanders’ office, if the bill becomes law, JPMorgan Chase and Bank of America would be reduced in size to where the banks were in 1998, while Wells Fargo would shrink back to where it was in 2005, and Citigroup would shrink back to where it was in the late-1990’s.
The name of the legislation, the “Too Big to Fail, Too Big to Exist Act,” draws directly from Sanders speech back in 2016, when he said that “if a bank is too big to fail, it is too big to exist.”
Sanders echoed those sentiments on Wednesday.
“No financial institution should be so large that its failure would cause catastrophic risk to millions of Americans or to our nation’s economic well being,” Sanders said in a statement. “We must end, once and for all, the scheme that is nothing more than a free insurance policy for Wall Street: the policy of ‘too big to fail.’”
Rep. Brad Sherman, D-Calif., will introduce a companion bill in the House of Representatives.
“Too big to fail should be too big to exist,” Sherman said. “Never again should a financial institution be able to demand a federal bailout. Today they can claim: ‘if we go down, the economy is going down with us.’ By breaking up these institutions long before they face a crisis, we ensure a healthy financial system where medium-sized institutions can compete in the free market.”
According to Sanders’ office, the bill is supported by the AFL-CIO, Public Citizen, Americans for Financial Reform, Center for Popular Democracy Action, Demand Progress Action, and a host of academics, including Simon Johnson, former chief economist at the International Monetary Fund and current professor at the Massachusetts Institute of Technology.
“The new Too Big to Fail, Too Big to Exist proposed legislation from Senator Bernie Sanders is short and to the point,” Johnson said of the bill. “The largest banks and other highly leveraged financial institutions are simply too big – and pose a real danger to our continued economic recovery. Make them break up into smaller pieces, bringing more competition, better service and lower risks for the American economy.”
To read Sanders’ bill in full, click here.