Politico’s new effort, The Agenda (asking, “How do we connect the dots between the robust debates in the war of ideas and the policy proposals actually on the table here in Washington?”) offers insightful, yet reasonably short pieces on future-focused topics. ModCon looks forward to referencing it in an ongoing manner. Its best feature just might be the running bar at top-left that shows the reader how far into the article they are.
The new piece about Bernie Sanders’ idea to break up megabanks, aka the “Too Big to Fail, Too Big to Exist Act,” is an indictment of the idea that bank size directly correlates to risk-taking, which the author warns we could see from many 2016 Democratic candidates when discussing economic policy.
Splitting our large US banks up would make us lose a competitive edge in the realm of global financial services. Also, we needed the biggest banks in 2008 (BOA, Wells Fargo, Morgan Chase) to absorb the mid-tier, busted banks like Lehman, Bear, and Merrill Lynch, because the biggest ones were the only stable ones with ability to do so. Furthermore, over 900 community or regional banks benefitted from TARP, meaning the ideas of moral hazard and behaving under the assumption of a federal bailout cannot have much to do with size.
In conclusion, as the next presidential campaign gets going do not buy into the idea that strict limits to company size and assets will make banking safer for the American public. Regulations are unfortunately needed, but amputation is not.