Rein in the Still-Too-Big-To-Fail, Too-Big-To-Manage Big Banks
One of the main goals of the Dodd-Frank financial reform bill was to make large banks less of a threat to the economy. One of the requirements was that the largest financial institutions need to submit plans, or living wills, for how the banks would enter bankruptcy in an orderly fashion in case of a crisis. Plans submitted by five of the largest banks have failed testing, which suggests that if there were another crisis today, the government would need to prop up the largest banks if it wanted to avoid financial chaos.
In order to prevent that from happening, we need to restore The Glass-Steagall Act, which successfully protected taxpayers and the economy from the risky bets investment banks take. From 1932 to 1999, the original Glass-Steagall Act led to the largest sustained period of economic growth and safe banking in U.S. history. It ensured that investment banks could take risks, but consumer deposits in commercial banks were protected.
Just seven years after Glass-Steagall was largely repealed in 1999, the economy suffered a major collapse and taxpayers were forced to bail out the banks. Now that five big banks have flunked two separate regulator tests of their ability to avoid being bailed out again, it's time to pass the "21st Century Glass-Steagall Act" to rein in the still too-big-to-fail and still too-big-to-manage big banks.