Dorgan Proposes Amendment To Stop Financial Institutions From Growing Too Big To Fail

By: Antonia Aguilar / University of New Mexico - Talk Radio News

Sen. Byron Dorgan (D-ND) proposed an amendment to the Wall Street Reform bill Tuesday to prevent financial institutions from expanding into powerhouses that are “Too Big To Fail.”

“This amendment that I offer would be mandatory rather than permissive,” said Dorgan. “If you have risen to be judged to have been 'too big to fail,' which would cause a grave financial risk to our entire economy ... the best most direct and most effective approach will be to have those institutions divest those activities and those portions of their business that have made them 'too big to fail.'”

According to Dorgan, his amendment will stop the future risk of taxpayer bailouts on Wall Street. The amendment will appoint the Financial Oversight Council to identify companies that pose a high risk to the financial stability of the U.S. and restrict their business activities until they are no longer a concern.

“It is another approach that is far superior, much more direct, more decisive and one that will produce better results,” said Dorgan. “It is the only one I think that effectively will end 'too big to fail.'”

Former State Senator: Too Big To Fail Means Too Big To Insure

By Chingyu Wang-Talk Radio News Service

Sam Zamarripa, a former State Senator for Georgia, is calling on Congress to put regulations in place that would prevent financial institutions from becoming "too big to fail."

"Too big to fail is also too large to insure," Zamrripa, who nows chairs the organization Stop Too Big To Fail, said during a conference call Wednesday.

Zamrripa explained that if an institution grows large enough to pose a systemic risk if it fails, then the U.S. should be able to step in and essentially break it up.

Former chief economist for the International Monetary Fund Sloan Johnson, who joined Zamarripa on Wednesday's call, said that adding resolution authority financial reform legislation will effectively end "too big to fail."

If implemented, the federal government would be able to take control of an institution in crisis and provide a number of safeguards against systemic failure by liquidating it.

"The resolution authority is a magic bullet," Johnson added.

New Bill Will Separate Commercial And Investment Banks

Travis Martinez, University of New Mexico/Talk Radio News Service

Senators Maria Cantwell (D-Wash.) and John McCain (R-Ariz.) introduced bipartisan legislation Wednesday that would prohibit commercial banks from affiliating themselves in any manner with investment banks or securities firms.

The Banking Integrity Act of 2009 would restore 1933 legislation, repealed in 1999 under legislation guided by former Sen. Phil Gramm (R-Texas), to establish a wall between commercial and investment banking to help protect depositors' money from being put at risk by Wall Street speculation.

"I'm sure that Senator Gramm probably does not agree with this legislation. It doesn't change our relationship, we just don't agree," said McCain.

“For nearly 60 years, a firewall maintained the integrity of banking systems; preventing self-dealing and other financial abuses; and limited stock market speculation,” said Cantwell during a press conference. “Our bill would return that firewall.”

Under Cantwell-McCain, major financial firms currently operating as both commercial banks and investment houses would have to make a decision on whether to focus on commercial or investment banking.

“I want to ensure that we never stick the American taxpayer with another $700 billion or even larger tab to bailout the financial industry. It is time to put a stop to the taxpayer financed excesses of Wall Street,” said McCain.

McCain brushed off concerns that Gramm, who served as a campaign adviser for the Arizona senator's 2008 presidential campaign, would be troubled by the move to sweep away his legislative accomplishments.