TBTF

Simon Johnson points to amendment to break up the "Too Big to Fail" Financial Institutions

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Simon Johnson is pointing to the Kanjorski amendment as a way to break up the 6 large banks who pose systemic risks, right now.

This is to patch up the Dodd bill and gives an in to go ahead and break up the 6 big banks now.

The approach in the Dodd bill simply will not work.

There is still a feasible alternative, based on a different approach – that proposed by Representative Paul Kanjorski (chairman of the Capital Market Subcommittee of the House Financial Services Committee) and adopted as an amendment in the House bill.

Let's hold the champagne and party favors!

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As reported earlier, Obama has taken a new populist stance regarding Wall Street. However, as John Carney points out, Big Banks Have Already Figured Out The Loophole In Obama’s New Rules.

Big banks have already begun poking the holes in Obama’s new rules—holes they expect their banks to pass through basically unchanged.

The president promised this morning to work with Congress to ensure that no bank or financial institution that contains a bank will own, invest in or sponsor a hedge fund or a private equity fund, or proprietary trading operations unrelated to serving customers for its own profit.

U.K. to break up big banks

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While we have proposals to create a permaTARP, the U.K. is breaking up the big banks:

The U.K.'s top treasury official Sunday said the government is starting a process to rebuild the country's banking system, likely pressing major divestments from institutions and trying to attract new retail banks to the market.

"I would hope that you would have perhaps three new entrants over the next few years," U.K. Chancellor of the Exchequer Alistair Darling said on the BBC's Politics Show.

News reports Sunday indicated sweeping plans to create three new high-street banks from assets sold by bailed out lenders Royal Bank of Scotland, Lloyds Banking Group and Northern Rock.

How much do "Too Big to Fail" Banks cost us? Try $34 billion a year

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the total taxpayer subsidy for the 18 large bank holding companies was $34.1 billion a year.

This is a quote from Dean Baker's study, The Value of the “Too Big to Fail” Big Bank Subsidy

Baker calculates the cost to the U.S. taxpayer for borrowing interest, the interest rate for 18 TBTF (too big to fail) banks vs. smaller ones. It's much lower, due to the new policy that these favored banks will never be allowed fail, regardless of their balance sheets.

The government guarantee TBTF becomes extended to investors and lenders to these banks, resulting in overall lower costs of doing business than our network of regional and smaller banks. Nice huh? That's competition and free markets, uh huh.

The full paragraph: