Mar 18 2013
In olden days, it used to be that the bad guys robbed the banks. Now it seems the bad guys are running the banks, at least the big ones, and robbing the rest of us. Nearly every day, newspapers have another disturbing report about how the largest and most influential banks managed to escape prosecution for their blatant fraud or else finagled outrageous subsidies and profits from their monopolistic dominance of the financial system. The worst that happens to privileged bankers who are “too big to fail” is an occasional scolding lecture from angry members of Congress.
Democratic Senator Sherrod Brown, fresh from his impressive re-election victory last fall, is back again with a simple, straightforward solution: make the big boys smaller. He is working on legislation with Republican Senator David Vitter to break up the half-dozen mega-banks and strengthen capital standards. This forced downsizing would make space in the marketplace, allowing many more midsize and smaller banking institutions to flourish. It could also protect the nation from another disastrous bailout of Wall Street at public expense.
“It’s not just that they are too big to fail,” the senator says. “They really are too big to understand and too big to manage. They are certainly too big to regulate. And they have only gotten bigger since the financial crisis.” The concentration of banking power in a few big-name firms was already dangerous. Now it is even more dangerous.
Senator Brown explains, “The four largest behemoths, now ranging from $1.4 trillion to $2.3 trillion in assets, are the result of thirty-seven banks merging thirty-three times. In 1995, the six biggest US banks had assets equal to 18 percent of GDP. Today, they are about 63 percent of GDP.”
In earlier eras, such a gross distortion of the economy would have prompted popular outrage, political campaigns for reform, then government legislation. In our time, the outrage is plentiful, but the political system is dead in the water. Despite the vast destruction produced by the concentrated banking system, neither party wants to embrace the remedy Brown proposes.