Senators Warren, McCain, Cantwell and King: We need to rein in 'too big to fail' banks
CNN Op-Ed: We need to rein in 'too big to fail' banks
More than five years after the bankruptcy of
The chances of another financial crisis will remain unacceptably high as long as there are financial institutions that are "too big to fail" -- entities that are deemed so important to the overall health and functioning of the markets that their collapse would bring down the entire financial system.
But over five years after the crash, the big banks are more concentrated and more interconnected and their appetite for excessively risky behavior is unchanged. The biggest banks are substantially bigger than they were in 2008. In fact, the five biggest banks now control more than half the nation's total banking assets.
Despite a marked increase in banks' overall stability since 2008, the risk of systemic failure continues to exist. In 2012,
That episode was yet another reminder that banks continue to engage in risky conduct and that regulators continue to lack the tools and willingness to stop such conduct before it happens.
That's why we co-sponsored the 21st Century Glass-Steagall Act. The Act, which we first introduced a year ago last week, would separate traditional banks that offer checking and savings accounts from riskier financial services, such as investment banking and swaps dealing.
It would encourage financial institutions to shrink to manageable sizes and eliminate their ability to rely on federal depository insurance as a backstop for high-risk activities. It would make banks smaller and less complex.
This proactive, structural approach to reducing bank risk should be far preferable to risk-management through over-regulation. Although a new Glass-Steagall Act would not resolve the "too big to fail" problem entirely, reinstating and strengthening the wall between federally insured commercial banks and investment banks would discourage the largest financial institutions from exploiting regulatory loopholes in order to take excessive risks at taxpayer expense.
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