Truthout is a vital news source and a living history of political struggle. If you think our work is valuable, support us with a donation of any size.
TARP – the infamous Troubled Assets Relief Program that bailed out Wall Street in 2008 – is over. The Treasury Department announced it will be completing the sale of the remaining shares it owns of the banks and of General Motors.
But in reality it’s not over. The biggest Wall Street banks are now far bigger than they were four years ago when they were considered too big to fail. The five largest have almost 44 percent of all US bank deposits.
That’s up from 37 percent in 2007, just before the crash. A decade ago they had just 28 percent.
The biggest banks keep getting bigger because they can borrow more cheaply than smaller banks. That’s because investors believe the government will bail them out if they get into trouble, rather than force them into a form of bankruptcy (as the new Dodd-Frank law makes possible).
That’s why it’s necessary to limit their size and break up the biggest.
Washington may be getting the message. A few months ago Dan Tarullo, the Fed governor who specializes in bank regulation, proposed capping the size of the banks’ balance sheets.
Some former titans of Wall Street are saying much the same thing. Even Sandy Weill, who created Citigroup (which required $445 billion in TARP loans and asset guarantees) is proposing the biggest banks be broken up.
The new Congress may also be supportive. The new chairman of the House Financial Services Committee, Texas Republican Jeb Hensarling, has been a strong ally of small banks in their push to rein in their bigger rivals, and has expressed concern about the largest being too big to fail.
It’s not irrelevant that the Dallas branch of the Federal Reserve Board, in Hensarling’s home district, has also proposed breaking up the biggest.
Meanwhile, over in the Senate, Ohio Senator Sherrod Brown, is a strong advocate for breaking up the big banks and is now on the Senate Finance Committee. And Elizabeth Warren, scourge of Wall Street, will sit on the Senate Banking Committee.
In other words, the timing is right. The oven is ready. All we need is another multi-billion dollar banking loss – like JP Morgan Chase’s last year – and the biggest banks are cooked.
An urgent fundraising appeal: 6 Days to raise $41,000
Truthout is one of only a few platforms for justice-oriented, grassroots journalism. Today, we face an existential threat.
Due to Google’s launch of AI search, we’ve seen a drastic plunge in our site traffic and, as a result, our revenue. We lost 15 percent of our readership overnight. This was a readership we painstakingly built over decades, and it vanished because Google chose corporate greed over a healthy democracy.
We are fundraising right now to meet our basic operating expenses. If you can support Truthout with a one-time or monthly donation, you will make a significant impact on our work. Anything you can do makes a difference — we appreciate your support.