Sen. Bernie Sanders, I-Vt., wants to break up JP Morgan, Wells Fargo, Morgan Stanley and several other big banks and introduced legislation Wednesday to do just that.
With Republicans expected to retain control of the Senate and President Donald Trump sure to be opposed, the bill stands little chance of becoming law. Still, Sanders returned the issue of Wall Street malfeasance to the news cycle.
Rep. Brad Sherman, D-Calif., will introduce a companion bill in the House.
Today, the six largest banks in America control assets equivalent to more than half the country's GDP and the four largest banks are on average about 80 percent larger today than they were before the bailout signed by President George W. Bush ten years ago, Sanders said.
The legislation introduced Wednesday would cap the size of the largest financial institutions so that a company's total exposure is no more than 3 percent of GDP, about $584 billion today.
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. "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.'"
"Too big to fail should be too big to exist," said Sherman, who has advocated this position since 2009. "Never again should a financial institution be able to demand a federal bailout. Today they can claim: 'if we go down, the economy is going down with us.' 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."
In the 10 years since the financial crisis and Wall Street was bailed out by taxpayers, the five largest banks have raked in more than $583 billion in profits, Sanders said. The six biggest banks have a combined total exposure of over $13 trillion, he added.
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.
As a result, JPMorgan Chase and Bank of America would be forced to shrink to where the banks were in 1998. Wells Fargo would go down in size to where it was in 2005. And Citigroup would shrink to where it was during the second term of Bill Clinton's administration.