Sens. Sherrod Brown (D-OH) and David Vitter (R-LA) on Thursday denounced “too big to fail” financial institutions and vowed to push legislation to break up the “megabanks.”
“Today, our economy is being threatened by multi-trillion dollar financial institutions,” Brown said on the Senate floor. “Wall Street megabanks that are so large that, should they fail, they would take the rest of the economy with them. Instead of failure, however, taxpayers are likely to be asked to cover their losses, to bail them out as we did five years ago.”
“This is a disastrous outcome because it transfers wealth from the rest of the economy into these megabanks and it suspends the rules of capitalism, perpetuating the moral hazard that comes from saving risk-takers from the consequences of their behavior,” the progressive Democrat added.
Brown said the six largest banks in the United States accounted for “about 102 percent of GDP.”
“It is simply impossible to believe that these behemoths will not get into trouble again, and they will not be unwound in an orderly fashion should they approach the brink of failure.”
Brown and Vitter, both members of the Senate Banking Committee, have pushed for the Government Accountability Office (GAO) to publish a report on the economic benefits banks receive from being “too big to fail,” such as favorable pricing of their debt and taxpayer-funded support.
“I don’t know if we quite define the political spectrum of the United States Senate, but we come pretty darned close,” Vitter said on the Senate floor following Brown’s speech. “And yet, we absolutely agree about this threat.”
Vitter said as a conservative he was both “nervous and suspicious” about the “intense concentration of power” by financial institutions. He noted that a number of prominent conservatives had called for “too big to fail” banks to be broken up because they were products of “crony capitalism.”
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