Simon Johnson points to amendment to break up the "Too Big to Fail" Financial Institutions

Simon Johnson is pointing to the Kanjorski amendment as a way to break up the 6 large banks who pose systemic risks, right now.

This is to patch up the Dodd bill and gives an in to go ahead and break up the 6 big banks now.

The approach in the Dodd bill simply will not work.

There is still a feasible alternative, based on a different approach – that proposed by Representative Paul Kanjorski (chairman of the Capital Market Subcommittee of the House Financial Services Committee) and adopted as an amendment in the House bill.

This amendment will allow federal regulators to preemptively break up large financial institutions that – for any reason – pose a threat to financial or economic stability in the United States. (Yes, there is a weak version of this idea currently in the Dodd draft, but it is very weak – allowing regulators to act “only as a last resort”; see p.3 of the official bill summary.)

Representative Kanjorski has exactly the right idea, but we need to go a step further – because we cannot at this point reasonably expect regulators to implement properly. Remember, in the Catch-22 type nature of these issues, the regulators can easily say: Implicit in Congress’s decision not to mandate a break-up, will infer a congressional intent that no institutions currently meet the criteria.

Folks, we should be paying attention to those pouring over any way in to actually obtain financial reform and ...you should write your Senators demanding they pass their findings.

Believe me, we're not getting much of anything and if any expert out there sees a road in to actually doing something, we should take it.

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Mr. Johnson is wrong

We can not go back and split these banks up. There needs to be an accounting, reorganization and nationalization. All management fired. Anything short of those proposals would be inefficient.

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sure you can break them up

The U.S. government has broken up many a too large corporation in the past. AT&T is the one which comes to mind lately. The government was going after Microsoft, but of course Bush came into office and amazingly, all of that effort was stopped and suddenly Microsoft became their best buddy. (lobbyists).

Although trying to get an accounting for behavior is yet another piece of the puzzle. We need major corporate governance reform, including making executive officers more personally liable, executive pay needs to be capped, the corporation needs to be aligned to U.S. economic interests through law, a host of things...
then derivatives is yet another major area of much needed regulation and reform.

But simply breaking up these 6 isn't unheard of at all.

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