Issue Position: Breaking Up The Big Banks

Issue Position

Breaking Up the Big Banks

Senator Sanders wants to break up the large banks. But doing so has nothing whatsoever to do with the core problems with trust-me banking -- leverage and opacity. In the early 1930s, one-third of the banks failed. The vast majority of them, as measured by their holdings of assets, were small. Hence, having a large number of small banks doing the same things that a small number of big banks do is no guarantee against bank runs and financial crisis. In many ways, breaking up the big banks would make a banking run far more likely, since the government would be letting the creditors to large banks know the government will protect their interests when push comes to shove. This makes them less likely to run to retrieve their money when they hear news about, for example, banks holding liar loans, but have no idea precisely what's involved.

For her part, Senator Clinton seems willing to break up the big banks once they agree to stop paying her and her husband massive speaking fees to, apparently, tell the banks what they want to hear. I say, apparently, because the senator has yet to disclose the transcripts of her speeches to eight big banks, which collectively paid her close to $2 million for her eight hours of "work." I view this as a fundamental and flagrant violation of ethics. Public service at the highest levels should not be a ticket to riches from those who seek to influence public decisions. Such service is an incredible honor, and that honor must be sufficient reward.

As for Mr. Trump, he too will become anti-big bank if he determines it will deliver him votes. Mr. Trump, as should by now be clear, has but one cause in which he fervently believes and for which he maintains consistent support -- Donald Trump.

If one really thinks the big banks should be broken up into small banks, adopting Limited Purpose Banking is the ideal answer. It forces the big banks to reorganize themselves as mutual fund holding companies that own lots of small banks, namely 100 percent equity-financed and fully disclosed mutual funds.

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