Breaking Up the Big Banks: Here’s How to Do It

By Rob Garver

A report expected later this year from the Government Accountability Office is expected to lend support to a growing movement aimed at reducing the size of the largest banks in the United States. Well before that report is released, though, advocates of breaking up the big banks have been busy readying proposals for just how to make that happen.

The proposals continue to mount because of widespread concern that the actions taken by the federal government in the wake of the financial crisis, including a legal prohibition on bank bailouts and a partial ban on banks trading securities, simply aren’t enough to prevent the need for another round of bailouts should there be a crisis.

At a hearing of the Senate Banking Committee’s Subcommittee on Financial Institutions and Consumer Protection last week, some of the leading contenders were discussed.

The Dallas Fed’s Plan
Harvey Rosenblum, a 40-year veteran of the Federal Reserve System who now teaches at Southern Methodist University and helped author a plan touted by the Federal Reserve Bank of Dallas, illustrated the danger huge financial institutions pose to the overall economy by citing a paper published by the Dallas Fed that found the financial crisis will, in the end, cost the U.S. economy between $10 trillion and $30 trillion in lost output....

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