Want big banks smaller? Then remove government interference 

Liberals calling for breaking up large banks are being taken for a class-warfare ride by President Obama. From Chris Stirewalt's Morning Must-Reads:

Liberals want the government to break up the big banks now. Conservatives want the big banks to lose any special regulatory status and be allowed to go bankrupt if they fail.

The Dodd-Obama bank bill does neither and in fact ensconces a handful of the biggest banks in what amounts to a VIP airport lounge for regulation and support. There are more rules, but the level of comfort is much greater than the rest of the terminal.

While President Obama promises to limit risk by controlling salaries for executives and imposing other restrictions, the best protection against risk – an inability to find investors – would actually be diluted by the special status for these elite bankers.

This is one of those rare instances in which the conservative and the progressive goal aligns. If you don't want banks to take on the kind of risk that could bring the economy down (like it did), all the government needs to do is stop bailing out banks and put limits on capital requirements for banks.

Much of the reason for a bank to get too big to fail is the belief that government will bail it out should the going get rough.

About The Author

J.P. Freire

J.P. Freire is the associate editor of commentary. Previously he was the managing editor of the American Spectator. Freire was named journalist of the year for 2009 by the Conservative Political Action Conference (CPAC). You can follow him on Twitter here. Besides the Spectator, Freire's work has appeared in... more
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