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Breaking up the big banks: Is anybody thinking? - Economics. Subscribe to AEI's Financial Services emails. Breaking up the big banks: Is anybody thinking? Download PDF Arguments that the biggest US banks should be broken into smaller entities because they are too big to fail (TBTF) have recently become more common. Breaking up the biggest banks would obviously have profound consequences for the US economy, but many who support the idea seem not to have given any serious thought to whether the benefits of a breakup exceed the associated costs.

Key points in this Outlook: Breaking up the biggest banks is said to have growing support in Congress, but the idea’s supporters—even those who are respected commentators—do not appear to have given it any deep thought. Obviously, for the United States to break up its largest banks would be a very consequential step with significant implications for our economy and financial system. This Outlook will lay out some of those issues. 1. Is TBTF Real? What Size Makes a Firm Not Too Big to Fail? Break Up Nonbanks? Don’t Break Up the Big Banks. Don’t Break Up the Big Banks. 25.Calomiris_forthcoming.pdf. Elizabeth Warren Vows To Break Up Big Banks With Major New Legislative Push. By Kumar Ramanathan, Guest Contributor "Elizabeth Warren Vows To Break Up Big Banks With Major New Legislative Push" Sen.

Elizabeth Warren questions a witness after a Senate Banking Committee Hearing on March 7. (Credit: AP Photo/Cliff Owen) A bipartisan group of Senators are proposing the “21st Century Glass-Steagall Act” in an effort to curb the power of big banks by reinstating a Depression-era rule that separated commercial and investment banking. Senators Elizabeth Warren (D-MA), John McCain (R-AZ), Maria Cantwell (D-WA), and Angus King (I-ME) proposed the bill on Thursday. Enacted during the Great Depression, the Glass-Steagall Act prevented commercial deposit banks, which are insured by taxpayer money through the Federal Deposit Insurance Corp (FDIC), from engaging in insurance and risky investment activities. “Banks should be boring,” Warren argued in her initial public push for the bill, her first major banking measure in the Senate. Kumar Ramanathan is an intern at ThinkProgress. Debates: Big banks: Guest. Want To Break Up The Banks? Be Very Careful What You Wish For.