Break up the big banks—now
MSN Money – Last week, Democratic Sens. Sherrod Brown and Ted Kaufman introduced a bill that would break up the biggest financial institutions and cap bank size so that they can never get so big again. Senate Banking Committee Chairman Christopher Dodd hasn't yet bought it, the Obama administration hasn't bought it, and the biggest banks aren't keen on it.
Yet the Safe Banking Act of 2010 might be the single most important piece of financial reform legislation under consideration, and it's the only legislation on the table that could protect against what should be our two biggest worries:
1.Another major meltdown driven by financial institutions that aren't worried about failure.
2.An economy run by uncompetitive, enormous financial institutions that distort the market because they are too big to be bothered to compete.
Typically, when confronted with the prospect of breaking up big banks, bankers and their apologists argue that socially useful economies of scale are endangered. But it's worth asking: What are the economies of scale that come along with a bank that has, say, $2.2 trillion in assets? (That's Bank of America (BAC, news, msgs).) Given that our six largest banks are now collectively worth more than 60% of U.S. gross domestic product, it's a burning question.
