The End of Too Big to Fail

By Rep. Paul Kanjorski
RealClearPolitics

"Too big to fail" must die. I am preparing legislation to empower federal regulators to rein in and dismantle financial firms that are so large, inter-connected, or risky that their collapse would put at risk the entire American economic system, even if those firms currently appear to be well-capitalized and healthy. Never again should American taxpayers have to bail out high-flying financiers when their risky bets go sour.

The economic meltdown we narrowly averted last year rightfully convinced the American people that we need to re-examine the fundamental structure of our financial system. Wall Street financiers, however, seem to think that -- now that they are basically stable thanks to American tax dollars that kept them afloat during the worst of the crisis -- they can just go back to business as usual. I have news for Wall Street: The world shifted, and it will never return to the way it was before mid-September, 2008.

Our only two living former chairmen of the Federal Reserve Board -- Paul Volcker and Alan Greenspan -- have both indicated they support making sure that our nation's largest financial institutions become smaller so that none would be too big to fail. Even John Reed, who helped engineer the merger that created Citigroup, now recognizes it was a mistake to create such a huge institution. "I would compartmentalize the industry for the same reason you compartmentalize ships," he recently told a Bloomberg reporter. "If you have a leak, the leak doesn't spread and sink the whole vessel."

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