Categorized | Elections, News

Marx on ‘too big to fail’ banks

MEDIA RELEASE

Bob Marx says banks must be broken up to increase competition and prevent future taxpayer funded bailouts from occurring.

Marx, Democratic Candidate and small business owner in Hilo, Hawaii, Monday called on Congress to pass legislation to decentralize control of the country’s financial institutions. The announcement that JP Morgan Chase had a $2 billion trading loss has renewed concerns about how banks manage risk.

Speaking to a crowd gathered at K’s Drive-In, Marx lamented on the sad state of affairs in the nation’s banking sector.

“The best way out of this mess is to not have banks that are ‘too big to fail.’ We should be supporting and encouraging the breakup of mega-banks and allow smaller, local banks to flourish,” Marx said.

Marx referenced the breakup of monopolies as evidence of the need to increase competition in the American banking Sector.

“Financial institutions are incapable of self-regulation. Asking banks to regulate themselves is like asking a fox to guard the chicken coop. It makes no sense,” Marx said.

Rep. Barney Frank and Sen. Chris Dodd co-authored legislation aimed at reforming the ways in which banks are regulated and monitored. Part of the Dodd-Frank reforms, known as the Volcker Rule, is supposed to restrict high-risk banking activities.

However, JP Morgan CEO Jamie Dimon said that the trades were made to hedge risk, and would therefore be permissible.

“The problem is that the rules only target proprietary trading; that is, trades made for pure profit. It doesn’t include trades that are made to hedge risk.” Marx paraphrased Dallas Federal Reserve President Richard Fisher, a strong supporter of breaking up the largest banks: “How big is too big? Let me tell you: Too big is when you have no idea what’s going on underneath you. If you’re that big, you’re too big.”

The real problem for Marx is that the laws in place remain too speculative and subjective.

“It shouldn’t be about stopping banks from hedging their high-risk gambles; it should be about not allowing banks to take on high-risk loans, mortgage-backed securities, and other investments in the first place,” Marx said. “As a first step, I strongly suggest the re-implementation of the depression-era Glass-Steagall Banking Act of 1933.”

The Glass-Steagall Act prohibited commercial banks from engaging in the investment business. It was part of President Roosevelt’s New Deal and enacted as an emergency measure after the failure of about 5,000 banks during the great depression. The act strictly prohibited commercial banks from underwriting securities.

It was repealed by Congress in the late 1990s.

Marx is a Democratic Candidate for Congress in the Second Congressional District, which includes rural Oahu, Maui, Kauai, Molokai, Lanai and the Big Island.

— Find out more:
www.bobmarxforcongress.com

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