Last week Senators Sherrod Brown and Ted Kaufman unveiled the “SAFE Banking Act” with a clear purpose: Breaking up the big banks.
The proposal places hard leverage and size caps on financial institutions. It is well crafted and based on a great deal of hard thinking, according to economist Simon Johnson. And, as suggested on the front page of The New York Times, it has the potential to draw a significant amount of support.
When the financial crisis first engulfed the world, wrote William Greider, opinion leaders rushed to explain it as a freak of nature -- a "perfect storm" that arrives once a century. Subsequent revelations destroyed that nonsense. "Like famines, financial crises are man-made. This one was made in America--invented on Wall Street and enabled by Washington complicity, Democrats and Republicans alike."
And the mechanism to enable the crisis was the big banks and their de-regulated ability to run amok. This video, created by my friend Mary Bottari, amusingly exposes the role the big banks have played in fomenting economic distress.
Fortunately, the perfidy of the mega-banks has not gone unnoticed, and Brown and Kaufman's bill represents the first legislative effort to confront the problem. Stressing the need for more competition among smaller banks and increased business lending, the senators believe that the largest financial institutions present a prohibitive risk to our economy.
The bill would place a cap on any financial institution, limiting its total assets to three percent of GDP (that would lower to two percent for banks, and three percent for non-bank institutions). Currently, the six largest banks have holdings that equal 63 percent of GDP. The Safe Banking Act would also impose a ten percent cap on any bank holding company’s share of insured deposits.
As Brown said when introducing the legislation, “If we’re going to prevent big banks from putting our entire economy at risk, we need to place sensible size limits on our nation’s behemoth banks. We need to ensure that if banks gamble, they have the resources to cover their losses.”
A new coalition of community organizations spearheaded by National People's Action, PICO and the Industrial Areas Foundation (IAF), is seeking to put significant pressure on legislators this week with plans for a series of national protests challenging the political influence of mega-banks just as the Senate takes up debate on the banking reform bill.
Peter Drier, writing at CommonDreams, helpfully explains the coalition's strategy: "The coalition's short-term goal is to push Congress to enact strong consumer protection regulations on the financial industry. Their intermediate goal is to pressure banks to stop the epidemic of foreclosures and renegotiate mortgages so owners can keep their homes. Their long-term goal is to limit the banking industry's political clout and its economic influence. They believe banking should be reorganized so it invests in good jobs, affordable housing, and environmentally-friendly businesses."
The protests start tomorrow, Tuesday, April 27, when organizers expect more than a thousand marchers to tromp through downtown San Francisco to Wells Fargo's annual shareholder meeting at the Merchants Exchange Building. Also tomorrow in Kansas City, family farmers, retirees, veterans and union members from Missouri, Kansas, and Iowa will march through that city's financial district to the Bank of America, an action that organizers are calling "showdown in the heartland."
On Wednesday, April 28 in Charlotte, NC, citizens hurt by foreclosures and lay-offs will rally at the First United Presbyterian Church and then, proxies in hand, march to Bank of America's annual shareholder meeting at Belk Theater, while in Chicago, unions, community groups, and faith-based activists will march to the corporate offices of Goldman Sachs, whose executive bonuses, illegal practices, and political influence-peddling have made it, to use Drier's apt words, "the poster child for public anger against big banks".
Then, this Thursday, April 29, thousands of people are expected to stage a massive march on Wall Street to hold big banks accountable for undermining the economy and to demand that Wall Street do its part to help Main Street recover. AFL-CIO President Richard Trumka will be among the high-profile speakers.
The protest actions will culminate in a three-day "Showdown on K Street" in Washington, DC from May 15 to 17. The DC mobilization will focus attention on the banking industry's political clout through its huge campaign contributions with a series of protests at the offices of corporate lobby groups and members of Congress -- Democrats and Republicans -- with close ties to the banking establishment.
Check out showdowninamerica.org/ for info on all these events and host of additional resources and please implore your senators to support The Safe Banking Act.
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