Senator Seeks Small Victory In The War Against Big Banks
Senator Bernie Sanders (I-VT), like many observers, views JPMorgan's loss -- $2 billion and counting -- as a warning shot about the risks in the banking system. There's even more concentration of assets in the banking sector now than prior to the 2008 crisis and the five-largest U.S. banks control over 50% of the industry's assets, up from 17% in 1970, according to the Dallas Fed.
"What recently happened at JPMorgan Chase tells us...the large financial institutions have learned nothing from the financial crisis which they caused and which has led to the worst recession since the 1930s," says Sanders. "I'm pleased to see an increasing number of of people are starting to understand...maybe it is time to start breaking up these behemoth financial institutions."
According to Sen. Sanders, the six-largest U.S. financial institutions have over $9 trillion in assets, more than two-thirds of U.S. GDP. "I fear we are moving down the path once again of financial collapse and then 'too big to fail' and then another taxpayer bailout," he says. (See: JPMorgan's "Wild, Crazy Insane Gamble" Puts Global Economy at Risk: Bill Black)
Given the ongoing stalemate over the Volcker Rule and efforts to finalize and strengthen the Dodd-Frank financial regulation, it's fair to say any effort to break up the big banks can't get a hearing in the current Congress, much less a chance of passage.
Given those realities, Sen. Sanders is aiming for a smaller victory in the war against big banks. Earlier this week, he co-sponsored legislation to ban financial executives from sitting on the board of regional Fed banks; Jamie Dimon, for example, sits on the board of the NY Fed.
The bill is aimed at "ending the absurdity of bankers all across the country sitting on regional Feds which regulate banks," Sen. Sanders says. "That is crazy. It's an absolute and apparent conflict of interest."
While ostensibly an arm of the government, the Fed is really a private institution owned by its member banks and Sen. Sanders is unbowed but realistic about prospects for the legislation: "Wall Street and big financial institutions want to be able to control regional Feds [and] they will oppose it," he says. "Nobody should underestimate the power of Wall Street."
Roger, that, Mr. Senator.
Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com
For additional coverage, see:
Dimon in the Rough: JPM Chief Faces Angry Shareholders, Spitzer Sees Conflict with NY Fed
JPMorgan Chase's $2B Loss: Why Simon Johnson Says CEO Jamie Dimon Should Resign
JPMORGAN PROVES IT: Wall Street Is Just Kids Playing With Dynamite
"If You Are Too Big To Fail, You're Too Big": Richard Fisher
Taken to Task: Jamie Dimon's House of Ill Repute
"It's Getting Worse": Why JPMorgan Is Struggling to 'Move On' from Its Bad Trade
