Bernie Quixote

Sen. Bernie Sanders (I-Vt.) on Wednesday is unveiling legislation that would place a hard cap on the size of financial institutions, a proposal that would splinter Wall Street’s biggest firms in an effort to ward off future taxpayer bailouts.

  WaPo

If only.

The measure is dead on arrival with a Republican Congress and President Trump in office. And even if the current Democratic Party were to take control of government, it would face a difficult path to passage, as many of the party’s moderates have opted for answers to the banking crisis that did less to alter the financial system.

Made all the less possible by Bush and Obama's handling of the 2008 financial crisis. Of course there's no political will to rein in the financial institutions. As long as you can bleed the taxpayer. Gee, wasn't going up against those guys a Trump campaign promise? Who in the world thought that would happen?

Sanders’ bill would bar financial institutions from holding assets, derivatives, and other forms of borrowing worth more than 3 percent of the entire U.S. economy, or $584 billion in today’s dollars.

The legislation would force federal regulators to break up six different Wall Street firms — JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley — as well as insurance giants such as Prudential Financial and MetLife. Collectively, the targeted firms hold more than $13 trillion in assets, according to Sanders aides.

Despite its unlikelihood of passing in the near-term, the measure could become a marker for Democrats seeking support from the party’s progressive voters, much like a single-payer, universal health care system has become.

[...]

In response to the 2008 [financial] crisis, Democrats narrowly passed a broad banking law that was meant to ensure that “too big to fail” banks took steps to ward off failure, subjecting the largest firms to more stringent restrictions aimed at limiting their risk.

The law, signed by former president Barack Obama, had 16 separate chapters and ran more than 2,300 pages long. Sanders’s measure runs seven pages, and instead goes after the size of banks, arguing firms of that size pose an inherent risk to the economy.

[...]

“This legislation cuts to the heart of the matter, by putting a size cap on the largest highly leveraged firms. The size cap is simple, straightforward, and transparent,” said Simon Johnson, an economist at MIT who served as chief economist of the International Monetary Fund and supports the bill. “This measure will bring us closer to full and fair competition in the financial system, where a few megabanks currently predominate.”

Four of the six biggest banks are on average 80 percent bigger than they were when they started receiving bailout funding about a decade ago, according to Sanders aides, as many of the largest financial firms acquired distressed banks during the crisis. JP Morgan, which acquired Bear Stearns in 2008 at the urging of the federal government, has grown by about 60 percent to $2.53 trillion, according to the company’s public disclosure forms.

Holy cow.

[ Thomas M. Hoenig, who recently stepped down as vice chair of the Federal Deposit Insurance Corporation that regulates the banking industry] pointed out that Republicans were joined by more than a dozen Democratic Senators in dismantling parts of Obama’s 2010 Dodd-Frank banking bill, an effort that many Republicans thought did not go far enough.

“Several Democrats just voted to ease capital standards on two of the largest banks,” Hoenig said. “So who is going to pass this law?”

Nobody in this Congress. But, Bernie's giving the progressives coming on something to run with. I think it's a great idea, whether he can get is passed or not.

Sanders had already called for breaking up the biggest Wall Street firms, but this new bill offers a new mechanism for doing so. Previously, Sanders had called for the Financial Stability Oversight Council to identify and break up “too big to fail” institutions in addition to supporting the reinstatement of Glass-Steagall — the 1930s law keeping commercial and investment banking separate. The new approach sets a clean cap on a financial institution’s size.

Start with bringing back Glass-Stegall, and go from there, but shoot for the moon, because they're going to whittle you down. You need extra padding that you can afford to jettison.

Robert Hockett, a professor at Cornell University who specializes in banking issues and helped draft Sanders’ “too big to fail” legislation, said the measure may more easily garner public support and offers a significant improvement on previous banking legislation.

“Like Obamacare, Dodd-Frank is very long, very nuanced, and very difficult to explain to people,” Hockett said. “It’s so much easier to explain Sanders’ bill.”

Which will make it easier to use in campaign ads.