Breaking Up The Banks May Be More Complicated Than It Seems

By Jim Zarroli

Sen. Bernie Sanders says that if he is elected president in November, one of his first acts in office would be to begin breaking up the large financial institutions that pose a grave risk to the economy. But there’s a problem with that idea: It’s not clear the president has the legal authority to break up the banks. “It’s not something the president can do. It’s not even something the Treasury can do,” says Karen Shaw Petrou, managing partner of Federal Financial Analytics. Banks are largely regulated by a patchwork of state and federal agencies, such as the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency. Regulators can, for example, require a bank to hold more capital if they deem some of its activities too risky. Meanwhile, the new Financial Stability Oversight Council, which was formed as part of the Dodd-Frank financial overhaul, has a lot of ammunition in its holster, including the ability to designate a non-bank financial institution as systemically important and force it to make changes in its operations.