When the country’s giant banks were teetering on the verge of collapse during 2008’s financial crisis, the U.S. government stepped in to bail them out. The banks were, in a phrase that has since become infamous, “Too Big To Fail.” Would the government do it again? And does the expectation that it would step in give megabanks an unfair competitive advantage over local community banks? Those are the questions at the heart of an eagerly awaited report released at the end of July by the Government Accountability Office, a nonpartisan federal department. In a conclusion that highlights the need for more regulatory action to reduce concentration in the banking system, the G.A.O. found that the answers to both questions are “yes.” Continue reading
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Introduced by Senator Sherrod Brown on May 9, 2012, the following bill would place size and leverage limits on big banks, forcing the largest four banks in the country to downsize. Continue reading
More than three years after their reckless greed triggered the Great Recession, the nation’s biggest banks have paid almost no penalty and are bigger than ever, as these two graphs illustrate. Continue reading
In 1994, Congress adopted a policy that bars a bank from buying another bank if the combined entity would hold more than 10 percent of the country’s deposits, but the policy has several flaws that have allowed at least two banks to exceed the cap. Continue reading
The Glass-Steagall Act created federal deposit insurance and erected a strict barrier between commercial and investment banking activities. It was repealed in 1999. In the aftermath of the financial crisis, many people, including prominent economists, policymakers, and even bankers, have called for restoring Glass-Steagall. The Volcker Rule, a provision in the Dodd-Frank financial reform bill, imposed some limits on the mixing of commercial and investment banking activities, but not the firm wall that Glass-Steagall had provided. Continue reading
How do we change course and revive a banking system that is more local and responsive to the needs of communities? Continue reading
Not one to let a good crisis go to waste, Bank of America managed, in the dark days of 2008, to parlay its own insolvency and near collapse into attaining something it had long dreamed of: federal approval to bypass a national law that says that no bank may acquire another bank if it would end up holding more than 10 percent of the country’s deposits.
Now, at long last, a new Senate proposal calls for reinstating strict size caps. It would mean disassembling at least five big banks.