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VIDEO: Paul Ryan Opposes Placing Stronger Regulations On Too-Big-To-Fail Banks

The House Republican budget that was approved in the lower chamber last week without any Democratic votes includes a promise to “revisit” some aspects of the Dodd-Frank financial reform law. At the top of the list for the House GOP, as explained in their budget outline, are the new tools included in Dodd-Frank that allow the government to deal with banks that are too-big-to-fail.

The Dodd-Frank law directs the newly created Financial Stability Oversight Council — which is tasked with policing systemic risk in the financial system — to identify banks and non-banks as systemically risky, and therefore subject them to stronger regulation. This addresses a key problem that existed in the pre-2008 financial system: large non-banks like AIG were allowed to become systemically risky without any sort of regulation, while the largest banks were not subjected to strong enough regulations even as they grew to massive size.

But House Budget Committee Chairman Paul Ryan (R-WI) — who authored the GOP’s budget — doesn’t believe that too-big-to-fail banks should have to abide by more stringent regulations. ThinkProgress’ Scott Keyes stopped by a Ryan town hall in Elkhorn, WI, where Ryan explained that the government shouldn’t try to identify which banks are the biggest and riskiest:

Now, the big banks, they just got a new law that basically says, if you’re so big then you’re going to get a bailout. So we’re basically amplifying too-big-to-fail and by deeming these big banks as systemically risky, that gives them the ability to go out in the markets and get cheaper money than all the smaller community banks. I think you’re just going to end up with massive banks in this country. That’s not healthy.

Watch it:

As I’ve pointed out over and over again, the Dodd-Frank law does not perpetuate bailouts but gives the government a new process — known as resolution authority — that was not available in 2008, forcing the government to resort to ad hoc bailouts. Former Treasury Secretary Hank Paulson said that he “would have loved to have” the resolution authority in Dodd-Frank, so he could have dismantled risky, failing firms instead of bailing them out.

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As for the GOP’s opposition to designating systemically risky firms, David Min explained that it amounts to ignoring the too-big-to-fail problem. Republicans would rather close their eyes and pretend too-big-to-fail doesn’t exist, rather than try to mitigate the chances that such a firms blows itself up. Other than more stringent regulations, the only other option is breaking up too-big-to-fail banks into smaller parts, an idea that Republicans roundly opposed during the financial reform debate.