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Is Ending Too Big To Fail Banking a GREATER Idea?

by Jonathan Denn, published

capIs Ending “Too Big To Fail” Banking a GREATER Idea?

The bursting of the housing bubble still has our nation reeling. While there is certainly enough blame to go around—the role of the Too Big To Fail Banks (TBTF) cannot be denied: or apparently prosecuted.

Recent studies from the International Monetary Fund and reported on by Bloomberg show that if it were not for the “risk-less” premium on the TBTF banks, they wouldn’t even be profitable. This “premium” also puts smaller banks at a competitive disadvantage. Why does government repeatedly favor Wall Street over Main Street?

On aGREATER.US where independents’ opinions are given an equal weight with conservatives’ and liberals’ ratings Ending Too Big To Fail Banks has an astonishing 97% positive approval rating. It almost doesn’t get more transpartisan than that. Is this reflective with that of society at large? A recent Rasmussen poll had only 23% of Americans opposed to breaking up the TBTF banks. Housing Predictor did an online poll in 2011 that had 83% of Americans wanting to bring back the Glass-Steagall Act.

Renowned bank regulator, William K. Black, now associate professor of economics and law at University of Missouri Kansas City, said this when I asked him about Glass-Steagall for this article.

“One of the most dangerous conceits is that the hard won financial lessons of the past are irrelevant to our “modern” economy.  The two worst pieces of financial legislation during the Clinton administration shared this arrogance:  the Commodities Futures Modernization Act of 2000 (which created a “regulatory black hole” for credit default swaps) and the Financial Services Modernization Act of 1999 (which repealed Glass-Steagall, and allowed renewed conflicts of interest of the kind that helped drive the Great Depression).  “Modernization” is a financial lobbyist’s euphemism for destroying vital regulations.”

You can drill down by reading Professor Black’s book, “The Best Way to Rob a Bank is to Own One: How Corporate Executives and Politicians Looted the S&L Industry.”

Essentially reinstating the Glass-Steagall Act would make banks boring again. There could be no more risk taking in the stock or derivatives markets. If a bank wants to make money they need to make loans—not be traders.

The purpose of this column, “a GREATER Platform” is to find the sliver of overlap between independents, conservatives, and liberals where greater (>) policy work can be done. If just one group agrees with independents but not the other we are still looking at partisan politics. If just liberals and conservatives agree it is likely to be a false equivalence. E.g. Cabbage is great. Chocolate is great. Chocolate covered cabbage would not do well on a restaurant’s menu.

But when we have a vast super-majority of Americans agreeing on an issue, perhaps Ending TBTF Banks, why oh why, doesn’t government listen? There is a difference between participative- and epistemic-democracy. Just because something is popular does not mean it won’t be the “tyranny of the majority.” But when the prevailing “knowledge” is added to popular opinion we get > governance.

Why hasn’t this been passed already? According to, in the last election cycle J.P Morgan Chase gave over $4 million to political candidates, the American Banker’s Association over $3 million, and Bank of America over $2.7 million. Gawker has the other TBTF financial institutions listed as Bank of New York Mellon, Citigroup, Morgan Stanley, State Street, Wells Fargo, and Goldman Sachs who gave almost $8 million to candidates in the last election cycle. If you were an elected official would you vote against the best interests of your donors?

“a GREATER Platform” spotlights superior choice creation, and first things first. Should Ending Too Big To Fail Banking be on the GREATER Platform? Please post your greater comments below: yes or no?  >

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