Most Ohioans would be surprised to know that the same Wall Street megabanks which received bailouts from taxpayers in 2009 also receive taxpayer-funded advantages today simply because of their "too big to fail" status. This taxpayer-supplied subsidy is wrong, and it puts community banks in Ohio at a competitive disadvantage.
This gives them access to cheaper funding and more favorable borrowing terms than dependable Main Street institutions - like Huntington Bank or The Peoples Bank in Coldwater, O. - simply because the market knows that the government would choose to bailout the Wall Street megabanks if they again reach the point of collapse.
A few Wall Street megabanks have become so large and so complex that no one-not their executives, nor their shareholders, nor their regulators-truly understand their financial health. Should these institutions fail, they would take the rest of the economy with them. But instead of failure, these megabanks would ask taxpayers to cover their losses, to bail them out as we did five years ago. When even the architect of the "too big to fail" banking model, former Citigroup Chief Executive Officer
Sandy Weill, agrees that the biggest banks should be broken up, we should all realize it's time to act.
Although the biggest megabanks were too big to fail before the crisis, they have only gotten bigger. The four largest behemoths, now ranging from $1.4 trillion to $2.3 trillion in assets, are the result of 37 banks merging 33 times.
In 1995, the six biggest U.S. banks had assets equal to 18 percent of Gross Domestic Product. Today, they are about 63 percent of GDP. They now have twice the combined assets of the rest of the top 50 U.S. banks.
I've visited several community banks throughout Ohio recently and have talked to community bank executives about the disadvantage they face competing against Wall Street megabanks. Millions of families and small businesses depend on their community banks for their savings accounts, home mortgages, and business loans. Community banks help create countless jobs and provide safe and reliable financing options to Ohio's families.
Taking the appropriate steps will lead to more mid-sized banks - not a few megabanks - creating competition, increasing lending, and providing incentives for banks to lend the right way. Just about the only people who will not benefit from my plan are a few Wall Street executives.
That's why my Republican colleague, Sen. David Vitter from Louisiana, and I are working on bipartisan legislation to address this "Too Big to Fail" problem. We have pressed regulators to require the biggest banks to have more of their own capital on hand to cover their losses, so taxpayers won't be asked to do so again. We have asked the government watchdog group Government Accounting Office to quantify the annual subsidy that megabanks receive from the U.S. government. And now we are taking action to prevent economic collapse and taxpayer-funded bailouts in the future.
American taxpayers don't want us to wait until another crisis develops. They want us to ensure that Wall Street megabanks will never again monopolize our nation's wealth or gamble away the American dream. We cannot restore Americans' faith in the financial markets and in representative government until we ensure that taxpayers are not paying for Wall Street's failures.