As the Democrat-dominated U.S. Senate considers new rules for the nation's banks-while ignoring Republican calls to reform the Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (Fannie Mae)-Sen. Bernie Sanders (I-Vt.) said that breaking up big banks is critical to meaningful reforms.
"One of the major components of any serious Wall Street reform has got to be breaking up the largest financial institutions in the country. The time has come to do exactly what Teddy Roosevelt did back in the trust-busting days and break up these huge financial institutions," Sanders said.
Sanders said the giant financial institutions must be dismantled not only to protect taxpayers from future bailouts, but because the concentration of ownership in the financial sector is leading to fewer choices, higher bank fees, and higher credit card interest rates.
"Not only are too big to fail financial institutions bad for taxpayers, the enormous concentration of ownership in the financial sector has led to higher bank fees, usurious interest rates on credit cards, and fewer choices for consumers," Sanders said.
Sanders said three out of the four biggest American banks -Wells Fargo, J.P. Morgan Chase and Bank of America-are larger today than they were before taxpayers bailed them out as the economy collapsed in 2008. Combined with Citigroup, the four largest U.S. banks now write half of the mortgages, issue two-thirds of the credit cards, and hold $7.4 trillion in assets, more than half the nation's economic output.
In addition to breaking up big banks, Sanders has said financial reform legislation should cap credit card interest rates, end Federal Reserve secrecy, separate financial institutions' gambles on derivatives so any losses would not be covered by federal banking insurance, and reform Wall Street to support job-creating small and medium-size businesses starved for affordable credit.
Sanders was silent this week regarding Republican calls to reform Freddie Mac and Fannie Mae. According to Republicans, both entities have proven extremely adept at lobbying the Democrat-controlled Congress to preserve and enhance their privileges.