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How Obama Can Smoke Out Mitt: Call for Breaking Up the Biggest Banks, and Resurrecting Glass-Steagall

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President Obama should propose that the nation's biggest banks be broken up and their size capped, and that the Glass-Steagall Act be resurrected. 

It's good policy, and it would smoke out Mitt Romney as being of, by, and for Wall Street -- and not on the side of average Americans. 

It would also remind America that five years ago Wall Street's excesses almost ruined the economy. Bankers, hedge-fund managers, and private-equity traders speculated on the upside, then shorted on the downside -- in a vast zero-sum game that resulted in the largest transfer of wealth from average Americans to financial elites ever witnessed in this nation's history. 

Most of us lost big -- including over $7 trillion of home values, a $700-billion-dollar bailout of Wall Street, and continuing high unemployment.

But the top 1 percent have done just fine. In the first year of the recovery they reaped 93 percent of the gains. The latest data show them back with 20 to 25 percent of the nation's total income -- just where they were in 2007.

The stock market has about caught up to where it was before the crash. The pay and bonuses on the Street are once again sky-high. So are the pay and perks of top corporate executives. The Forbes list of richest Americans contains more billionaires than ever. 

And the tax rates of the top 1 percent are lower than ever -- courtesy of their armies of lobbyists.

Mitt Romney, private equity manager and financier -- well within the top one-tenth of 1 percent, collecting more than $20 million a year, yet paying 14 percent in taxes because of tax preferences for capital gains and for private-equity -- is the avatar for all that's happened.

Just like the rest of the Street, Romney used other peoples' money to make big bets, leveraging like mad, pumping and then dumping companies regardless of the human costs. 

Worse, Romney wants to cut taxes even further on the top 1 percent -- giving them them lion's share of a $4.7 trillion tax cut -- while shredding safety nets the rest of us rely on. 

And he wants to repeal the Dodd-Frank Act that goes some way to preventing the worst excesses of the Street. 

And this man has an almost 50-50 chance of becoming president? 

The President should counter Romney's extraordinary solicitude toward the Street with a proposal to cap the size of the nation's biggest banks so that no bank is ever again too big to fail. And to resurrect the Glass-Steagall Act, which once separated commercial from investment banking.

In the 1980s the ten biggest banks had less than 30 percent of bank depositary assets. Now they have 54 percent. And the four biggest now dominate the Street almost completely. Because lenders and investors know they're too big to fail, the four biggest banks have a competitive advantage over smaller rivals that pose larger financial risks. That means they'll only get bigger. 

Breaking up the biggest banks and capping the size of all banks is hardly a radical suggestion these days. The Dallas Federal Reserve Board, which has never been accused of excessive liberalism, has called for it. So has Sanford Weill, the creator of Citigroup, one of the biggest of the big. So has Daniel Tarullo, the Federal Reserve governor charged with bank regulation. So have conservative commentators such as George Will. 

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http://robertreich.org/

Robert Reich, former U.S. Secretary of Labor and Professor of Public Policy at the University of California at Berkeley, has a new film, "Inequality for All," to be released September 27. He blogs at www.robertreich.org.
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Thank you for such a strategic and common-sense id... by manifesto 2000 on Saturday, Oct 20, 2012 at 2:30:17 AM
After 4 years of bailouts costing us trillions of ... by Ted Andromidas on Saturday, Oct 20, 2012 at 11:40:26 AM
Yes, he must be a shill for the Obama/Democratic P... by Deborah Dills on Saturday, Oct 20, 2012 at 12:24:03 PM
I put this article in the "Rainbow Stew" category ... by Poor old Dirt farmer on Saturday, Oct 20, 2012 at 1:18:18 PM
Really? You must be under some delusional drug tha... by Deborah Dills on Saturday, Oct 20, 2012 at 12:21:24 PM
and as stated in the previous comments he's just p... by dorothy przystas on Saturday, Oct 20, 2012 at 7:46:13 PM
At the very least he could ask you to be new Secre... by James Tennier on Saturday, Oct 20, 2012 at 1:08:41 PM
Holder wants his paycheck for Services Rendered to... by Poor old Dirt farmer on Saturday, Oct 20, 2012 at 1:29:25 PM
"How Obama Can Smoke Out Mitt" Right, Obama is ... by Robert S. Becker on Saturday, Oct 20, 2012 at 1:59:45 PM
Reich has the right prescription.  But its cl... by John Andrews on Saturday, Oct 20, 2012 at 2:14:52 PM
If you don't do this, please don't complain. Ever ... by Daniel Geery on Sunday, Oct 21, 2012 at 12:36:00 PM
As far as dealing with Wall Street goes, there is ... by Rudy Avizius on Saturday, Oct 20, 2012 at 4:23:07 PM
both by institutions and indivividuals, represents... by Richard Girard on Saturday, Oct 20, 2012 at 4:38:33 PM
President Barack Obama and Federal Reserve Chairma... by Lance Ciepiela on Saturday, Oct 20, 2012 at 7:12:38 PM
But what if Romney's elected in two weeks, Profess... by Marta Steele on Sunday, Oct 21, 2012 at 10:16:51 AM
              &... by Lance Ciepiela on Sunday, Oct 21, 2012 at 11:03:39 AM
Then how is he going to square that with his "Big ... by Herbert Calhoun on Sunday, Oct 21, 2012 at 11:38:24 AM