Democratic Senator Presses Regulators On Why Big Banks Can’t Be Broken Up

Sen. Joe Manchin (D-WV)

Last week, Sen. Elizabeth Warren (D-MA) gained a deserved amount of attention for grilling bank regulators on whether the nation’s biggest financial firms have become “too big for trial.” But she wasn’t the only one chasing regulators for answers on how to rein in the nation’s banking behemoths.

Sen. Joe Manchin (D-WV) wanted to know why regulators aren’t looking at reimplementing a wall between traditional commercial banking and risky investment banking like the Depression-era Glass-Steagall law. “If it worked so well for so many years why do you all not believe that it’s something we should return to or look at?” Manchin asked:

Glass-Steagall was put in place in 1933 to prevent exactly what happened to us. It was in place, I think for approximately 66 years, until it was repealed. Up until the 70s, it worked pretty well. We start seeing some changes and chipping away with new rules that took some powers away from Glass-Steagall. And then we finally repeal in 1999 and the collapse in 2008. The Volcker Rule, and I know it doesn’t do what the Glass-Steagall does, why wouldn’t we have those protections? If it worked so well for so many years why do you all not believe that it’s something we should return to or look at?

Watch it:

Federal Reserve Board governor Daniel Tarullo, while not endorsing a return to Glass-Steagall, did admit that “the mistake lay in not substituting a new, more robust set of structures and measures that could take account of the intertwining of conventional lending with capital markets. That process of pulling away old regulations, but not putting in place new, modernized, responsive regulation, I think that’s what left us vulnerable.” Tarullo has previously called for limiting banks’ size to a certain percentage of the economy.

Currently, the largest 0.2 percent of banks (just 12 institutions) control 69 percent of bank assets. As Demos noted in a report, the financial sector sucks $635 billion every year out of the economy that could otherwise go to more productive uses.

Manchin is hardly alone in calling for a re-examination of whether the biggest banks need to be so big. “These banks are not just too big to fail, they’re too big to manage,” said Sen. Sherrod Brown (D-OH) told ThinkProgress. “I think these banks will be stronger and healthier and probably more profitable if they’re smaller.”