Last week, Sen. Bernie Sanders (I-Vt.) said he planned to introduce legislation to break up America’s “too big to jail” banks that have discouraged the Justice Department from prosecuting them for fear of causing financial instability.
America’s 10 biggest banks have grown even larger since the 2008 financial crisis, which prompted Congress to approve a $700 billion bailout and the Federal Reserve to provide $16 trillion in support to failing financial institutions.
U.S. Attorney General Eric H. Holder Jr. said the Justice Department is unlikely to pursue criminal prosecution of the banks because filing charges could “have a negative impact on the national economy, perhaps even the world economy.”
“In other words, we have a situation now where Wall Street banks are not only too big to fail, they are too big to jail,” Sanders said. “That is unacceptable and that has got to change because America is based on a system of law and justice.”
The six largest U.S. financial institutions, including JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley, have total assets of nearly $9.6 trillion, an amount of about two-thirds of the nation’s GDP. The institutions issue more than two-thirds of all credit cards, more than 50 percent of all mortgages, control 95 percent of derivatives and hold more than 40 percent of all U.S. bank deposits.
Sanders’ proposal would give Treasury Secretary Jacob Lew 90 days to compile a list of financial institutions that he deems too big to fail, and the Treasury would have one year after the legislation becomes law to break up designated institutions.
“If an institution is too big to fail, it is too big to exist,” Sanders said. “No financial institution should be so large that its failure would cause catastrophic risk to millions of American jobs or to our nation’s economic wellbeing. No single financial institution should have holdings so extensive that its failure could send the world economy into crisis. We need to break up these institutions because…of the tremendous damage they have done to our economy.”