Sanders seeks breakup of banks

Senator proposes bill, says ‘too big to fail’ is ‘too big to exist’

Sen. Bernie Sanders, a Vermont independent and Democratic presidential candidate, said Wednesday in Washington that his breakup list would have to include the biggest lenders.
Sen. Bernie Sanders, a Vermont independent and Democratic presidential candidate, said Wednesday in Washington that his breakup list would have to include the biggest lenders.

WASHINGTON -- Sen. Bernie Sanders proposed legislation Wednesday to break up the nation's biggest banks, setting up a contrast with former Secretary of State Hillary Rodham Clinton as both seek the Democratic presidential nomination.

The measure would create a "too big to fail" list -- compiled by regulators -- of banks and bank holding companies whose collapse would be considered to pose a threat to the financial system.

Sanders said that list "would have to include" JPMorgan Chase & Co., Bank of America Corp., Bank of New York Mellon Corp., Citigroup Inc., Goldman Sachs Group Inc., Morgan Stanley, State Street Corp. and Wells Fargo & Co.

"If an institution is too big to fail, it is too big to exist, and that is the bottom line," said Sanders, a Vermont independent who is running for the 2016 Democratic presidential nomination.

In Charlotte, N.C., Bank of America CEO Brian Moynihan defended big banks at his firm's annual shareholder meeting Wednesday. Clients and shareholders benefit from a wide range of services that provide a diverse income stream, he said.

"If we broke it up, we'd lose $13 billion in markets revenue a year," Moynihan said. "We'd lose $6 billion in investment banking revenue."

"If you broke it up, each of the entities left over would still be a SIFI," or systemically important financial institution, he said.

Sanders has proposed versions of his legislation in each session of Congress since the 2008 financial crisis. He sought to attach it to President Barack Obama's 2010 financial overhaul, known as the Dodd-Frank Act, and to advance it as a separate bill.

Sanders voted for what would become the Dodd-Frank Act, though he has said it doesn't do enough to crack down on Wall Street practices.

"Dodd-Frank did not end much of the casino-style gambling" that occurs on Wall Street, Sanders said Wednesday.

"I fear very much" that the financial system is weaker than people realize, Sanders said. Big banks are 80 percent larger than they were before the financial crisis, he said.

Sanders' bid to break up the banks is part of his argument that average Americans are falling further behind in the economy as the wealthiest Americans become wealthier. Ninety-nine percent of the income being generated in the U.S. is now going to the top 1 percent of Americans, he said.

"In the midst of all of this grotesque level of income inequality," said Sanders, "sits Wall Street."

Clinton is trying to unify Democrats behind her presidential bid, including progressives who think Wall Street is rigging the economy to its own advantage. Sanders' bill allows him to pressure Clinton to back up her rhetoric on Wall Street with specific proposals.

Clinton also faces hurdles because of her association with the administration of her husband, former President Bill Clinton, which lowered previous restrictions on bank activities and allowed the banks to grow into behemoth institutions.

For most of Hillary Clinton's tenure in the Senate, banking regulation receded from the front tier of the political agenda, until the financial collapse of 2008.

Still, after opposing a banking industry-backed revision in bankruptcy law as first lady, she reversed herself and backed bankruptcy legislation in 2001. Then-presidential candidate Obama used it to criticize Clinton in the 2008 campaign.

The legislation didn't pass. When a bankruptcy law was passed in 2005, Clinton didn't vote because her husband was in the hospital.

During her campaign launch in Iowa, Clinton criticized hedge-fund managers who pay lower taxes than "nurses or the truckers I saw on [Interstate] 80 when I was driving here over the last two days."

Yet there's a risk for Clinton in moving too far toward the positions advocated by Sanders, a self-described socialist.

During the 2012 presidential campaign, Wall Street executives were irritated by Obama's rhetoric and regulatory positions and gave much of their campaign cash to Republican candidate Mitt Romney, co-founder of private-equity firm Bain Capital.

Information for this article was contributed by Mike Dorning, Phil Mattingly and Hugh Son of Bloomberg News.

A Section on 05/07/2015

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