Brad Sherman
WASHINGTON—Senator Bernie Sanders (I-VT) and Congressman Brad Sherman (D-CA) plan to reintroduce in the House and Senate new legislation to break up financial institutions that are “too big to fail.”
The legislators intend to introduce the “Too Big to Fail, Too Big to Exist Act.” It is the third time Sherman and Sanders have introduced the legislation, which sources indicated will include changes from previous bills. The legislation is endorsed by the Independent Community Bankers of America.
The legislation would require the secretary of the Treasury to submit to Congress a list of all banks and other financial institutions that the secretary believes have become too big to fail. Those entities deemed too large would then be broken up in a managed process of reorganization to avoid government bailouts and future risk to the U.S. economy, according to a release from Sherman's office.
“Too big to fail should be too big to exist,” said Sherman in a released statement. “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.”
“Every financial institution should compete for funds based on the soundness of its balance sheet, and no financial institution should be able to claim that there is a special federal safety net available to its investors because of the institution’s sheer size,” continued Sherman.
“In my view, no single financial institution should have holdings so extensive that its failure could send the world economy into crisis,” Sanders said. “At the very least, no institution, no CEO in America should be above the law. If an institution is too big to fail, it is too big to exist.”