do exactly what Teddy Roosevelt did back in the trust-busting days and break up these banks. The point Roosevelt was making was, it is bad for the economy when a handful of entities control industry after industry. They have a stranglehold on the economy. You have to break them up. Yet I have heard very little discussion—I know there was an amendment from Sherrod Brown and Ted Kaufman, and I introduced legislation on this issue to start breaking them up. But, frankly, their lobbyists and their money are such that it becomes very difficult to do that. But that is exactly what we should be doing.
The legislation I introduced last year, S. 2746, the Too Big to Fail, Too Big to Exist Act, would break up these large financial institutions. That legislation would require the Secretary of Treasury to identify every single financial institution and insurance company in this country that is too big to fail within 90 days; and after 1 year, the Secretary of the Treasury would be required to break up these institutions so their failure would not lead to the collapse of the U.S. or global economies.
I think that is pretty obvious. We passed a financial reform bill, which I supported and got a major provision in there asking for disclosure at the Fed, an investigation of conflicts of interest at the Fed, and an audit of the Fed during the financial crisis. But overall, I, by no means, think that legislation went anywhere near far enough. I think that is a modest piece of legislation and an issue we have to revisit.
I worry very much about the future because I have a feeling in my stomach that day is going to come around again, when these huge financial institutions are tottering, when they are going to go running to Washington, and they are going to say: Hey, you have to bail us out. In my view, if an institution is too big to fail, it is too big to exist. Let us break them up so we do not have to go through another bailout of Wall Street.
Furthermore, I believe when you have that kind of concentration of ownership—when you have four large financial institutions holding half the mortgages in this country, controlling two-thirds of the credit cards, and amassing 40 percent of all deposits— this is not good for a competitive economy.
We are supposed to be living in free market capitalism, real competition. This is not free market competition. This is a huge concentration of ownership, where a few people have enormous power over the economy, and with their wealth, the political life of this country.
No single financial institution should be so large that its failure would cause catastrophic risk to millions of American jobs or to our Nation’s economic well-being. No single financial institution should have holdings so extensive that its failure could send the world’s economy into crisis. We were there 2 years ago, and in many ways, despite the passage of the financial reform bill, we are even more there now. The big, huge financial institutions we bailed out are bigger, more huge today.
Interestingly enough, on that issue, it is not just progressives such as myself who hold that view. There are some pretty conservative folks who are honest conservatives. The concentration of ownership in a handful of entities; is that a conservative proposition? Not in terms of my understanding of what conservatives are about. I do not think so.
You have at least three Federal Reserve Bank presidents who support breaking up too-big-to-fail banks. James Bullard, president and chief executive of the Federal Reserve Bank of Saint Louis; Kansas City Fed president Thomas M. Hoenig; and Dallas Fed president Richard W. Fisher—these guys do not have my political views. I am a proud progressive. My guess is they are conservatives. But anybody with an ounce of brains in their head understands that four large financial institutions that have assets that are more than half the GDP of the United States of America places us, A, in a very dangerous position in terms of too big to fail, and, B, it is just bad for a competitive economy.
Is there any wonder why people are paying 25 percent or 30 percent interest rates on their credit cards? That is because these guys issue two-thirds of the credit cards in America. Is there any reason why they were issuing fraudulent mortgage packages to people? Because there is not the kind of competition that should be there.
But this is not just Bernie Sanders' point of view. Here is what Kansas City Fed President Hoenig said. I am sorry I do not have a date on that, but I think it was fairly recently—last year. This is Kansas City Fed President Hoenig:
This is Thomas Hoenig, the head of the Kansas City Fed. A very simple statement. He is absolutely right. But—and I am going to get to the reason why in a little while—we have not been able to do this. We have not been able to do this because Wall Street sends their lobbyists down here in droves and Wall Street provides zillions of dollars in campaign contributions and Wall Street fights like the dickens to make sure that any strong provisions that some of us might bring up are defeated. Here is what the President of the Dallas Fed, Mr. Fisher, said:
Winston Churchill said that. He is quoting Mr. Churchill:
In finance, everything that is agreeable is unsound and everything that is sound is disagreeable.
That is from Churchill.
Mr. Fisher continues:
I think the disagreeable but sound thing to do regarding institutions that are too big to fail is to dismantle them over time into institutions that can be prudently managed and regulated across borders. This should be done before the next financial crisis because we now know it surely cannot be done in the middle of a crisis.
That is Dallas Fed president Mr. Fisher.
They are already in the process of breaking up big banks in England. According to the Washington Post:
The British government announced Tuesday—
Not this Tuesday, way back last year—
that it will break up parts of major financial institutions bailed out by taxpayers. The British government, spurred on by European regulators, is forcing the Royal Bank of Scotland, Lloyds Banking Group, and Northern Rock to sell off parts of their operations. Europeans are calling for more and smaller banks to increase competition and to eliminate banks so large that they must be rescued by taxpayers, no matter how they conducted their business, in order to avoid damaging the global financial system.
A very interesting development occurred on October 15 of last year. On October 15—as I mentioned earlier, Alan Greenspan, who was the chairman of the Fed before Mr. Bernanke, and I have had our run-ins. Mr. Greenspan, along with Mr. Rubin and others, were the chief proponents—Larry Summers in there—were the chief proponents of deregulation of financial institutions, and Mr. Greenspan and I had more than a few arguments. But on October 15 of last year, Alan Greenspan, who admitted his views on deregulation were wrong—and I give the man courage for at least admitting he was wrong. He did a heck-of-a-lot of damage, but at least he had the courage to admit he was wrong. He was quoted in Bloomberg News as saying:
If they are too big to fail, they are too big. In 1911, we broke up Standard Oil. So what happened? The individual parts became more valuable than the whole.
Maybe that’s what we need to do.
Alan Greenspan, the architect of deregulation, citing the fact that in 1911 we broke up Standard Oil. So here we have Greenspan, who helped cause this crisis, at least having the courage to understand that now is the time to begin breaking up these big financial institutions. They have enormous power over our economy. They have enormous power over our political life. Their lobbyists are all over this place. You can’t walk down the hall without bumping into some of their lobbyists. So we have to start breaking them up
