(CNSNews.com) - Sen. Bernie Sanders (I-Vt.) unveiled legislation at a Capitol Hill news conference Wednesday that would break up any ‘too big to fail’ institutions and reorganize them to avoid taxpayer bailouts.
“If an institution is too big to fail, it is too big to exist,” said Sanders in explaining the legislation that he introduced Wednesday along with Rep. Brad Sherman (D-Cal.), which is titled the “Too Big to Fail, Too Big to Exist Act.”
“The bill I am introducing today with Congressman Brad Sherman would require regulators of the Financial Stability Oversight Council to establish a too big to fail list of financial institutions and other huge entities whose failure would pose a catastrophic risk on the United States economy without a taxpayer bailout,” said the senator.
“Within a year, the Treasury secretary would be required to break up financial institutions on this list so that they cannot cause another financial crisis. Importantly under this bill, none of the institutions on the too big to fail list would be able to receive a taxpayer bailout from the Federal Reserve, nor could they gamble with the federally insured bank deposits of the American people while they are on that list,” he added.
“I fear very much that the financial system is even more fragile than many people may perceive,” said Sanders. “This huge issue simply cannot be swept under the rug. It has got to be addressed. During the financial crisis of 2008, the American people were told that they needed to bail out huge financial institutions, because they were too big to fail.
“Yet today, three out of the four financial institutions, three out of the four largest financial institutions in this country, JP Morgan Chase, Bank of America and Wells Fargo are 80 percent larger than they were on Sept. 30, 2007, a year before the taxpayers of this country bailed them out. So we bailed out the largest financial institutions in this country, because they were too big to fail, and today three out of the four financial institutions are much, much larger than they were when we bailed them out,” he said.
“In other words, if any of these financial institutions were to fail again, the taxpayers of this country would be on the hook for another bailout, perhaps even larger than the last one,’ Sanders added. “We must not allow that to happen. No single 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.
“No single financial institution should have holdings so expensive that its failure would send the world economy into crisis. If an institution is too big to fail, it is too big to exist, and that is the bottom line,” he said.
“The function of banking should be boring, boring,” Sanders said, “The function of banking should not be about making as much profits as possible, gambling on derivatives and other esoteric financial institutions. The function of banking should be to provide affordable loans to small- and medium-sized businesses in the productive economy.”
“Never again should a financial institution be able to demand a federal bailout,” said Sherman. “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.”