The WSJ is reporting that the House Financial Services Committee passed an an amendment that gives Federal Regulators the power to break up Too Big To Fail financial corporations like A.I.G. and Citi. This is an essential step toward putting our economy on a solid financial footing by ensuring that no one firm can become a menace to larger economy should it fail because of its sheer size and interconnectedness.
Panel Approves Curbs on 'Too Big' Firms
A divided House Financial Services Committee voted 38-29 to approve an amendment offered by Rep. Paul Kanjorski (D, Penn.) that would allow a council of regulators to determine whether factors including the size or interconnectedness of an individual firm pose "a grave threat to the United States." Such a firm could be prohibited from merging with another firm or be required to sell business units or assets.
I've been urging breaking up the Too Big To Fails for months. See Keeping theToo Big to Fails intact keeps our economy at risk
This news comes as a relief. I had my doubts about getting real financial reforms with the Financial Services Committee chairman Barny Frank inexplicably not including Over the Counter Derivatives in his Bill's proposed regulatory structure. That could leave our economy with a huge vulnerability to another financial collapse from leaving OTC Derivatives with little transparency for investors. I was so pessimistic that the House would pass any Bill with teeth when a Committee hearing seemed stacked with pro-industry experts. You can read about that in my diary Financial Services Committee cut off pro-regulation Economist That's why this news comes as such a relief.
Of course the Republicans are in a snit:
"This puts the 'D' in draconian," said Rep. Jeb Hensarling (R., Texas). Mr. Kanjorski said the position was a difficult one for him to take, but that "no firm should be considered to be 'too big to fail.' "
Republicans see this as an attack on Capitalism. Ironic when you consider that restoring regulation to the Banking sector is the best way to save Capitalism.
This development to give the Federal Government the power to curb Too Big To Fail financial firms surpasses all my expectations. The Financial Reform Bill still has to pass the full House, while Sen Dodd has introduced his own version that is working its way through the Senate Banking Committee.
This is a populist issue that Democrats need to champion. Wall Street is so unpopular that this can propel Democrats to victory, and its a sure loser for the Republicans to be seen as siding with the Banks.
.
UPDATE: Democracy Now does it again. This story is a MUST listen: As Wall Street Posts Record Profits and US Hunger Rate Grows, Robert Scheer Asks: "Where Is the Community Organizer We Elected?"
.