On Wednesday, Sen. Bernie Sanders (I-Vt.) introduced a legislation aimed at breaking up the nation’s biggest banks and risky financial institutions. Rep. Brad Sherman (D-Calif.) will introduce a companion bill in the House for this legislation.
According to a statement released by Sanders and Sherman on the legislation, by applying a cap on the size of financial institutions, the bill would break up the six largest banks in the country: JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley. The bill would also address large non-bank financial service companies such as Prudential, MetLife and AIG.
“No financial institution should be so large that its failure would cause catastrophic risk to millions of Americans or to our nation’s economic well being,” Sanders said in a statement. “We must end, once and for all, the scheme that is nothing more than a free insurance policy for Wall Street: the policy of ‘too big to fail.’”
Under the bill, entities that exceed the 3 percent cap would be given two years to restructure until they are no longer too-big-to-fail. These “Too Big to Exist” institutions would no longer be eligible for a taxpayer bailout from the Federal Reserve and could not use customers’ bank deposits to speculate on derivatives or other risky financial activities.
This legislation would force banks such as JPMorgan Chase and Bank of America to shrink their sizes to where they were in 1998, Wells Fargo would shrink to its 2005 size, and Citigroup would shrink to the size it was in the early 1990s.
“By breaking up these institutions long before they face a crisis, we ensure a healthy financial system where medium-sized institutions can compete in the free market,” Sherman said.
To read the Bill, click here.