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“Congress should take a page out of the book of antitrust law,” he said. “The antitrust approach asks not how regulatory agencies can monitor the mammoth financial institutions, but whether those institutions should exist at all.”

Congress and regulators can begin to curb the excessive size of financial firms by enforcing existing limits on the concentration of banks and other depository institutions — which would put a lid on further acquisitions by megabanks such as Bank of America and JP Morgan, he said.

“If it’s too big to fail, it’s too big to exist,” said Rep. Bernard Sanders, Vermont independent, who has introduced legislation directing the Treasury to identify and break up “too big to fail” banks within 90 days.

The banks maintain that their enormous balance sheets of $2 trillion or more are needed to compete effectively with foreign banks in multi- trillion-dollar global markets, even though European regulators are moving to break up some of their biggest competitors and Fed studies have shown that banks need assets of only about $50 billion to operate effectively in international markets.

The big banks, long a potent funding source for political campaigns, are waging a major lobbying campaign that appears to have been successful so far against efforts to break them up. Particularly effective in pushing the industry’s point of view has been Jamie Dimon, the chief executive of JP Morgan, the one big bank whose reputation emerged relatively unscathed from the crisis. His frequent meetings with President Obama and other top Washington officials has given him the moniker “Obama’s favorite banker.”

Mr. Dimon is one of the top contributors to federal campaigns, having made contributions of $50,000 or more, according to, which also list as top contributors executives from Goldman Sachs Group, Citigroup, AIG, Freddie Mac, Morgan Stanley, Bank of America, MBNA Corp. and other big financial firms.

“We do not think that legislation forcing the break-up of large banks is likely to be enacted” despite some “headline risk” for the big banks in coming weeks, said Brian Gardner, a Washington analyst with Keefe, Bruyette & Woods, an investment firm specializing in banks.

Mr. Geithner has defended his plan to regulate the big banks before Congress and insists that he would choose to close most failing institutions rather than try to keep them alive. Nevertheless, in negotiations with Congress, he has insisted on maintaining the option of bailing out faltering giants. One source close to the negotiations said he even refused to put a $1 trillion limit on the cost of future rescues that the Treasury and Fed deem to be necessary to protect the economy.

Mr. Geithner maintains his proposal is designed to encourage banks to downsize themselves by imposing higher capital requirements on large institutions, as well as stiffer regulations, including oversight of executive pay, and requiring them to write “living wills” outlining how to close the banks down in case they fail.

But analysts say the requirements are not stringent enough to offset the great advantage the banks reap every day from lower borrowing costs as a result of their implicit government backing.

Currently, large banks with more than $100 billion in assets can borrow at rates one-third of a percentage point below their smaller counterparts, more than quadrupling the advantage large banks had before the crisis a year ago, according to the Federal Deposit Insurance Corp.

The cost-of-funds advantage that the big banks have is comparable to that which enabled Fannie Mae to grow into the world’s largest financial company. Fannie Mae borrowed at rock-bottom rates and invested in a huge portfolio of risky but lucrative mortgage securities — an arbitrage tactic that was highly profitable for the company for years, but blew up and became the source of huge losses during the mortgage crisis.

After being crippled by the crisis, Fannie last year became a ward of the state, and along with Freddie Mac, has drained government coffers of $120 billion so far.

“The administration’s plan would create what are essentially government-sponsored enterprises like Fannie Mae and Freddie Mac in every sector of the financial economy — insurers, securities firms, finance companies, bank holding companies and hedge funds” by designating them as too big to fail, said Peter Wallison, financial analyst at the American Enterprise Institute.

“The result will be devastating for competition. Larger firms will squeeze out smaller ones,” he said, including the nation’s 8,000 community banks, which already are suffering and being closed down by the dozens in the wake of the crisis precipitated by their larger brethren.

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