Too Big to Jail?

— an Op-Ed by Senator Bernie Sanders

We are supposed to be a country of laws. The laws should apply to Wall Street as well as everybody else. So I was stunned when our country’s top law enforcement official recently suggested it might be difficult to prosecute financial institutions that commit crimes because it may destabilize the financial system of our country and the world.

“I am concerned,” Attorney General Eric Holder told the Senate Judiciary Committee, “that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute — if we do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy.”

The attorney general was talking about some of the same financial institutions that received billions, and in some cases trillions, of dollars in taxpayer bailouts after their greed, recklessness and illegal behavior plunged the country into a terrible recession. Over my opposition, Congress approved a $700 billion taxpayer bailout of financial institutions that were on the brink of collapse which some in Congress considered “too big to fail.”

In addition, the Federal Reserve provided over $16 trillion in total financial assistance to these same institutions during the financial crisis (which only became public after an amendment I inserted into the Dodd-Frank Wall Street Reform and Consumer Protection Act requiring the Fed to disclose this information).

The attorney general’s view seems to be that if you are just a regular person and you commit a crime, you go to jail. But if you are the head of a Wall Street company, your power is so great that a prosecution could have destabilizing consequences with national or even worldwide implications.

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. That view is unacceptable.

The attorney general’s troubling acknowledgement has revived interest in an idea that is drawing more and more support. It is time to break up too big to fail financial institutions.

The 10 largest banks in the United States are bigger today than they were before a taxpayer bailout following the 2008 financial crisis.

U.S. banks have become so big that the six largest financial institutions in this country (J.P. Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley) today have assets of nearly $9.6 trillion, a figure equal to about two-thirds of the nation’s gross domestic product. These six financial institutions issue more than two-thirds of all credit cards, over half of all mortgages, control 95 percent of all derivatives held in financial institutions and hold more than 40 percent of all bank deposits in the United States.

I will soon introduce legislation that would give the Treasury secretary 90 days to compile a list of commercial banks, investment banks, hedge funds and insurance companies that the Treasury Department determines are too big to fail. The affected financial institutions would include “any entity that has grown so large that its failure would have a catastrophic effect on the stability of either the financial system or the United States economy without substantial government assistance.” Within one year after the legislation becomes law, the Treasury Department would be required to break up those banks, insurance companies and other financial institutions identified by the secretary.

Breaking up the too big to fail financial institutions is a notion that has drawn support from some leading figures in the financial community. Richard Fisher, president of the Dallas Federal Reserve Bank, wrote this: “The safer the individual banks, the safer the financial system. The ultimate destination — an economy relatively free from financial crises — won’t be reached until we have the fortitude to break up the giant banks.” James Bullard, the head of the St. Louis Fed, also weighed in. “I do kind of agree that ‘too big to fail’ is ‘too big to exist.'” Thomas Hoenig, the former Kansas City Fed president, was an early supporter of the idea of breaking up big U.S. banks. “I think [too big to fail banks] should be broken up. And in doing so, I think you’ll make the financial system itself more stable. I think you will make it more competitive, and I think you will have long-run benefits over our current system, which leads to bailouts when crises occur.”

In my view, 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 economy into crisis. And, perhaps most importantly, no institution in America should be above the law. We need to break up these institutions because of the tremendous damage they have done to our economy.

If an institution is too big to fail, it is too big to exist.

Under the Reading Lamp — 4/16/2012

Big Victory For Strawberry Lovers

earthjustice.org: Do you like to eat strawberries grown without cancer-causing fumigants? You do! Well then, have I got some news for you! Last night, Arysta LifeScience, the producer of the toxic fumigant methyl iodide (sold under the sunny corporate nomenclature “Midas”) announced it is pulling its product—designed for use primarily in strawberry fields—off the U.S. market. The announcement comes as the California Superior Court was about to issue its decision in an Earthjustice lawsuit aimed at stopping the use of the dangerous chemical.

Cantor Proposal for 20 Percent Business Tax Deduction Would Provide Windfall for Wealthy, Not Create Jobs

CBO Rated Similar Approach One of Least Effective Ways to Create Jobs

Chuck Marr | Center on Budget & Policy Priorities:  Though billed as a measure to create jobs by aiding small businesses, House Majority Leader Eric Cantor’s (R-VA) proposal for a 20% tax deduction in 2012 for businesses with fewer than 500 employees would benefit many high-income taxpayers — including many affluent doctors, lawyers, and stockbrokers — while failing to generate the promised economic benefits. The Urban-Brookings Tax Policy Center estimates that nearly half — 49% — of the $46 billion tax cut that the measure would provide would go to people with incomes over $1 million a year.

Why a Fair Economy is Not Incompatible with Growth but Essential to It

Robert Reich, Op-Ed: “Taxes were far higher on top incomes in the three decades after World War II than they’ve been since. And the distribution of income was far more equal. Yet the American economy grew faster in those years than it’s grown since tax rates on the top were slashed in 1981.”

 

What the Laws of War Allow

Chase Madar |Op-Ed: Watch, if you can bear it, as the helicopter crew blows people away, killing at least a dozen of them, and taking good care to wipe out the wounded as they try to crawl to safety. (You can also hear the helicopter crew making wisecracks throughout.) When a van comes on the scene to tend to the survivors, the Apache gunship opens fire on it too, killing a few more and wounding two small children.

Activists To Launch “We Can’t Wait” Campaign Challenging White House On Anti-Discrimination Order

Igor Volsky, News Report: The White House insists that it’s putting the executive order on hold in order to build legislative support for the Employment Nondiscrimination Act or ENDA, which would prohibit all employers from discriminating against gay, lesbian, bisexual, and transgender employees. But the measure stands little chance of passing in a Republican-controlled House of Representatives and some LGBT advocates were left with the impression that the administration punted on the order because it is “wary of imposing additional requirements on businesses ahead of the election.

CNN Includes Gay Adoption Advocate in ‘Heros’ Series

Video Report: CNN has named David Wing-Kovarik, who founded Families Like Ours to help gay and lesbian people adopt children from the foster system, as one of its Heroes of 2012. “I’m fighting for the right of that child to have that family,” Wing Kovarik says. “It’s why I keep doing it every single day.” Watch a short segment about his work.

 

The World’s Richest Failed State: Fairness and Freedom in Contemporary America

Tom Magstadt, Op-Ed: We live in a country where the super rich pay a far smaller share of the income they get than the average middle class taxpayer, where the Buffet Rule is etched into tax laws that heavily favor “capital gains” (the kind Mitt Romney and the Koch brothers rake in) over “earned income” (wages and salaries of store clerks, mechanics, and assembly line workers.

Former Bush EPA Chief Sounds Alarm on Chemical Security

Jim Morris, News Analysis: “In the months after the Sept. 11 terrorist attacks, then-EPA administrator Whitman ‘seriously considered’ using the Clean Air Act to shore up chemical security, she wrote Jackson. ‘After careful consideration, I decided that our best alternative was to pursue legislative action to achieve this goal.’ The Bush White House chose not to back such legislation.”

Proposals Raising the Normal Retirement Age for Social Security Would Lead to Increase in Inequality

Alan Barber, News Report: The report, “The Impact on Inequality of Raising the Social Security Retirement Age,” projects the impact of a gradual increase of the normal retirement age on various demographic groups, looking at each quintile of the wealth distribution, as well as the richest 1 percent. The paper also contains separate projections for homeowners and non-homeowners, single individuals and couples in several age cohorts. These projections demonstrate that Social Security wealth is a much larger share of wealth for the bottom four of the five groups.

Climate on Steroids: More Mainstream Media Coverage of Extreme Weather and Climate Change

Stephen Lacey, News Analysis: The Weather Channel has also picked up on the story, featuring a number of stories about the influence of human activity on extreme weather. One of the best segments featured meteorologist Stu Ostro, who explained why “data and science, not politics” changed him from a skeptic to someone very concerned about the problem. Add a new piece from the Weather Channel to the mix of growing coverage.

Just One of Monsanto’s Crimes, or Why We Can’t Trust the EPA

Alexis Baden-Mayer, News Report: The EPA knew the truth about Monsanto’s dioxin crimes, but it decided to hide it. Why? It would have affected us all. EPA’s brief criminal investigation of Monsanto included evidence that Monsanto knowingly contaminated Lysol with dioxin, even as the product was being marketed for cleaning babies’ toys. Here are the details of this jaw-dropping and heart-breaking case of corporate criminality and EPA collusion.

Hey Etch-A-Sketch-Conservatives, Time to Resurrect Some Honesty

Leo Gerard, Op-Ed: Honorable journalists abide by an ethics code forbidding lying to secure a story. For them, the end does not justify the means. By contrast, for O’Keefe and today’s Etch A Sketch conservatives, the end they want vindicates any scheme to secure it. Deliberate lying, cynical deceit, cut-and-paste deception – all of that is rationalized by conservatives to get their way. It’s a lovely escape clause they’ve written for themselves from that annoying Judeo-Christian thou-shalt-not-lie commandment.

Behind Closed Doors, Broadcasters Battle Online Disclosure of Political Ad Buys

Justin Elliott, News Report: Right now we only know the broad thrust the proposed FCC rule: That broadcasters would have to electronically send the commission updates to its political file — in other words, information about what political ads are being purchased, by whom, and for how much money — instead of merely maintaining paper files at the stations, the current practice. The information would be made public on an FCC website.

The Latest SEC/Goldman Sachs Sweetheart Deal is the Worst One Yet

Richard (RJ) Eskow, Op-Ed: It’s not just the fact that the SEC continues to ignore the public’s outrage by letting bankers off scott-free. And it’s not just that this kind of irresponsible behavior ensures that the law breaking will continue. Its not just that crooked bank executives are allowed to “neither admit nor deny wrongdoing.” It’s not even the fact that this time around the SEC has worded its announcement in a clumsy attempt to obscure the criminal behavior of Goldman’s employees – although that’s one of this agreement’s worst features.

Official List of 29 2B2F Banks Released

The Official list of the 29 banks that are considered too big to fail was released this morning.  The list, as determined by a G20 cabal known as the Financial Stability Board, are the members of the Globally Systemically Important Financial Institutions club.

  1. Bank of America (US)
  2. Bank of New York Mellon (US)
  3. Citigroup (US)
  4. Goldman Sachs (US)
  5. J.P. Morgan (US)
  6. Morgan Stanley (US)
  7. State Street (US)
  8. Wells Fargo (US)
  9. BNP Paribas SA (France)
  10. Banque Populaire (France)
  11. Crédit Agricole SA (France)
  12. Société Générale SA (France)
  13. Barclays PLC (UK)
  14. HSBC Holdings PLC (UK)
  15. Lloyds Banking Group PLC (UK)
  16. Royal Bank of Scotland PLC (UK)
  17. Mitsubishi UFJ FG (Japan)
  18. Mizuho FG (Japan)
  19. Sumitomo Mitsui FG (Japan)
  20. Commerzbank AG (Germany)
  21. Deutsche Bank AG (Germany)
  22. UBS AG (Switzerland)
  23. Credit Suisse AG (Switzerland)
  24. Dexia SA (Belgium)
  25. Bank of China (China)
  26. Unicredit Group SA (Italy)
  27. ING Groep NV (Netherlands)
  28. Banco Santander SA (Spain)
  29. Nordea AB (Sweden)