[Occupymendocino] Break up the Big Banks letter

[agnes at mcn.org]

Please send a similar letter to Congress asking them to break up the big
banks, now.


Dear Senators Fienstein and Boxer,
          Please urge the President and Congress to pass legislation to
break up the big banks .
 Ask President Obama to repudiate A.G. Holder's contention that big banks
are above the law.
Either prosecute big banks or nationalize them before they demand another
bailout.
Sincerely,
Agnes Woolsey

 Above the Law by  Robert Borosage

Holder’s outrageous admission means that bankers operate – and know they
operate – above the law.  That renders all the argument about regulations
and legal limits risible.  Bankers spend tens of millions lobbying to
weaken regulations and starve regulators of authority and resources.  But
when the action gets hot, the bubble starts to build, the music keeps
playing, they can trample the laws, mislead the regulators and defraud
their customers, bolstered by the confidence that the laws will not apply
to them.

Holder’s argument, however, is indefensible.  There is no reason a bank
with billions of assets could not survive the indictment of its CEO or
CFO.  If the Fed and Treasury can “foam the runway” to protect otherwise
insolvent banks from collapse, they surely could insure that a bank
survives while its executives are held personally responsible for their
crimes.  Putting a few bankers in jail and holding them personally
accountable for their frauds would do much to bring sobriety back to Wall
Street.

The Campaign for a Fair Settlement, of which the Campaign for America’s
Future is a partner, has called on the president to repudiate Holder’s
statement, and to direct the Justice Department to prosecute those who
violated the law.  But Holder’s position forces a bigger issue.

Too Big to Be

So big banks operate above the law.  And as the conservative head of the
Dallas Federal Reserve Bank Richard Fischer and many others have argued,
they are not disciplined by the market.  They know their losses are
covered, while they pocket their winnings.  They have multi-million dollar
personal incentives to leverage up, use other people’s money to make big
bets on high risk operations that offer big rewards.  Their excesses blew
up the economy, but they got bailed out and emerged bigger and more
concentrated than ever.

And, of course, since investors know the big banks can’t fail, the big
banks can attract money at much lower rates than smaller banks, a subsidy
worth about $83 billion a year according to recent calculations by
Bloomberg News.

Clearly, institutions that are above the law and beyond the discipline of
the market cannot exist in their current form.  The Congress has only two
choices.  The big banks can be nationalized and treated as public
utilities.  The public would pocket their profits and cover their losses. 
Or the big banks can be broken up, and be accountable to both the law and
the market.

Senators Sherrod Brown and Jeff Merkley have spearheaded the drive to
break up the big banks.  This takes remarkable courage.  Brown had to
overcome torrents of big money poured into the effort to defeat him when
he ran for re-election last year.

Now they are gaining unlikely allies.  George Will has called on
conservatives to follow Brown to the barricades.  Republican Senator David
Vitter has joined in calling for study of the subsidy big banks enjoy. 
Retired bankers like John Reed, former president of Citibank have joined
with Dallas Fed President Fischer and others to call for breaking up the
banks.

Can the big banks be held accountable?  Wall Street is a leading source of
funds for both parties.  The revolving door between Wall Street and
Washington spins no matter what administration is in power.  The Obama
administration has opposed every effort to break up the big banks. 
Republicans in Congress have shamelessly offered themselves as Wall
Street’s protectors in exchange for campaign money.

But Holder’s admission makes action – however improbable – imperative.  A
nation of laws and markets cannot abide huge private financial
institutions that are accountable to neither.

Robert L. Borosage is the founder and president of the Institute for
America’s Future and co-director of its sister organization, the Campaign
for America’s Future.