CounterPunch is a lifeboat of sanity in today’s turbulent political seas. Please make a tax-deductible donation and help us continue to fight Trump and his enablers on both sides of the aisle. Every dollar counts!
At a hearing on Capitol Hill this week on “too big to fail” banks, both corporate parties were posturing.
Strutting their stuff.
Ripping into each other.
But the reality?
When push came to shove, both didn’t have the guts to do the right thing to prevent another bailout.
That would be ? limit the size of the big banks so that they are no longer “too big to fail.”
“Too big to fail” means exactly that.
The banks are too big to fail.
If they fail, we must bail them out.
Or the economy goes down in a spectacular flameout.
The six biggest banks in America?
Bank of America.
JP Morgan Chase.
Together, they control assets equal to about 65 of GDP.
Twenty years ago, that number was about 15 percent of GDP.
The hearing yesterday was held by a House Financial Services Committee subcommittee chaired by Congresswoman Shelley Moore Capito (R-West Virginia).
Before the hearing got started, Public Citizen was passing out a letter calling on Capito to formally disclose that her husband now works for one of the those too big to fail banks ? Wells Fargo.
She has so far refused to do so.
But the conflicts on the committee on both sides of the aisle are deeper than the horse crap at the back of any barn in Capito’s Second Congressional District of West Virginia.
True, the Republican side is marinated in Wall Street cash.
Just as an example, Capito’s number one contributor over her career is from another one of the too big to fail banks ? Citibank.
But the Democrats are marinated in Wall Street cash too.
And therefore the hypocrisy on the Democratic side is as deep ? maybe deeper ? than the conflicts.
The best in show winner for posturing was Congressman Luis Gutierrez (D-NY).
Gutierrez used his five minutes to rip into the Republicans for being the party of Wall Street.
He ended pointing at his Republican colleagues and saying ? “You should just tell people you’re for big banks and make it clear and simple.”
Then he got up and left.
Didn’t want to contemplate of the hypocrisy of it all.
But Congressman Brad Miller (D-North Carolina) was shameless.
Miller understands ? as does almost everyone on the committee ? that the way you deal with the problem of too big to fail banks is to limit their size so that they are no longer too big to fail.
There actually was a vote on the Senate side in 2008 on an amendment ? the Brown-Kaufman amendment ? that would have done the trick.
Miller introduced a similar amendment in the House.
Miller put it this way:
“Senator Kaufman introduced an amendment on the Senate side that failed, that would limited the overall size of those — of banks to 2 percent of the GDP. That’s still like a $300 billion company. That’s a pretty big — pretty big bank, big enough to do pretty much anything, but it would have required that the six biggest firms be broken up into more than 30 banks.”
“No Republican support for that law,” Miller said. “I introduced the idea on the House side, but the fight was really over on the Senate side.”
What is Congressman Miller not telling us?
He is not telling us that the Brown/Kaufman amendment was defeated by President Obama and his Secretary of Treasury Tim Geithner.
Neil Barofsky, who was the Special Inspector General for the TARP, told Corporate Crime Reporter last week that the Brown Kaufman amendment would have passed had the Obama administration gotten behind it.
Instead, Treasury Secretary Geithner lobbied against the bill.
“The reason it didn’t pass was because the Treasury Secretary lobbied individual Senators to convince them to vote against this bill,” Barofsky said.
And what is the result of that vote?
“The largest banks are now 20 percent larger today than they were going into the crisis,” Barofsky said. “They are systemically more significant, they are bigger, they are more important. And we just haven’t seen the political or regulatory will to take on the fundamental problems that are presented by these institutions.”
“Standard and Poors recently put the U.S. government’s credit rating on watch. And one of the things they talked about was the contingent liability to support our financial institutions. And they estimated that the up front costs of another bailout could be up to $5 trillion.”
“And when you think about the focus on our budget issues, our deficit and our debt ? what happens with the next crisis and we have to come up with another $5 trillion to bail out our system once again?”
“It’s a terrifying concept. One of TARP’s biggest legacies is that it emphasized to the market that the government would not let these largest banks fail. And we haven’t done anything to address this problem. So, we are going to be right back where we were in late 2008 ? if not in a worse position.”
Russell Mokhiber edits the Corporate Crime Reporter.