Congress Goes to Bat For Wall Street, Rejects Plan To Break up Banks
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Late last night, the U.S. Senate rejected the single most important element of Wall Street reform by a vote of 33 to 61. The SAFE Banking Act would have forced the break-up of the nation's six largest banks, and dramatically reduced the political clout of
Last night, 27 Democrats joined all but three Republicans to vote against breaking up the banks.President Barack Obama opposed both the tax and the break-up measures, and hosted J.P. Morgan Chase CEO Jamie Dimon for dinner at the White House on Monday. J.P. Morgan is the largest U.S. bank, and spent more money on lobbying in 2009 than any other bank. House Minority Leader John Boehner, R-Ohio, has aggressively courted Dimon for campaign cash.
There is literally no economic evidence that megabanks do anything to help the economy that cannot be accomplished with smaller institutions. By contrast, centuries of research has shown that giant banks are destructive. Adam Smith was warning against the dangers of megabanking back in the 18th century. And the current crisis in Europe-- which appears to be deepening by the day-- should make those dangers apparent to everyone living in today's economy. There are plenty of good economic reasons to cut our financial behemoths down to size, and no good reasons not to.The good news is, there are still some smaller-bore reforms in the legislation that are worth voting for, and it appears that some version of reform, however tepid, will ultimately be approved. Congress will be deploying a screwdriver to perform a job fit for a bulldozer, but a few weeks ago, it was not obvious that even the screwdriver would make it through.
Shortly before the vote on breaking up the banks, Sen. Bernie Sanders, I-Vermont, cut a deal with Sen. Chris Dodd, D-Conn., that would subject all of the Federal Reserve's bailout operations to a thorough public audit. Despite all of the attention heaped on the Treasury Department and the Troubled Asset Relief Program, the Fed has operated as the chief bailout engine of the