Former Clinton administration labor secretary Robert Reich believes that the nation’s largest banks need to be broken up, and took to his Facebook page today to explain why:
This week, the Justice Department and Securities and Exchange Commission sued Bank of America Corp., the nation’s second-biggest lender, accusing it of misleading investors in an $850 million mortgage-backed bond. Meanwhile, JP Morgan Chase, the biggest Wall Street bank, is under federal criminal investigation for practices tied to sales of mortgage-backed bonds that the Justice Department has already concluded broke civil laws.
It doesn’t matter. These banks will continue to flout the law unless the probability of their being found guilty multiplied by the size of the penalty is greater than the profits they make through illegal activities. Which means they’ll continue to break the law because the probability is low — investigative and legal personnel have been cut at the Justice Department and SEC, while the banks have huge legal staffs and access to the best law firms in the nation– and the likely penalties are so small relative to their businesses (JP Morgan, for example, has $2.44 trillion in assets and $1.2 trillion in deposits) they’ll be treated by the banks as the costs of doing business.
The only answer is to break up the biggest banks. They’re too big to fail or jail, and pose an ongoing danger to the economy. We don’t need to wait for Congress to break them up. Both the Justice Department and the Federal Trade Commission have the authority to do it under the nation’s antitrust laws. We broke up the oil companies a century ago, and broke up Ma Bell decades ago. It’s now time to take on the biggest banks. (I’d add this to your list of what progressives must fight for.)