Once again, the issue of "too big to fail" is in the foreground, as we have obviously learned NOTHING from the last financial crisis. If there is ANY lesson that we must NEVER forget, it is this: "too big to fail (or jail)" is really too big to EXIST, period. And here is what we absolutely MUST do going forward: give all banks and corporations large enough to have "systemic risk" (that is, where them failing would literally bring the whole economy down) a choice between the following menu of options:
- Pay a prohibitive 90% marginal tax rate on all profits beyond the first billion, or,
- Break up into smaller, unaffiliated banks or companies, similar to what anti-trust laws require for monopolies, or,
- Full nationalization by the federal government, and (if already failed or failing) replacing the entire board of directors.
That's it. That's the ONLY real solution.
Of course, we also need to bring back the Glass-Steagall Act and pass a financial transactions tax and repeal the safe harbor provision of bankruptcy law and regulate derivatives better and stuff like that.
So what are we waiting for?
Banks should not be allowed to receive government money for bank bailouts. If banks did receive government money for a bailout, then that would be corporate socialism. There should be capitalism that works for the people and for corporations. This means that if banks fail, then they should fail. Banks that did not engage in fraudulent practices get to survive while banks that did engage in fraudulent practices do not get to survive. This incentivizes banks not to commit white collar crimes.
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