Top Fed Official: “The Moment Is Now” to Break Up Big Banks

The nation’s largest banks are “a perversion of capitalism” and “a clear and present danger to the U.S. economy.” The Dodd-Frank financial reform legislation passed in the wake of the crisis “may actually perpetuate an already dangerous trend of increasing banking industry concentration.”

These arguments come not from an Occupy Wall Street activist, not from a Tea Party member, but from a scathing report released last week by one of the nation’s top banking regulators, the Federal Reserve Board of Dallas. In a column for ProPublica and The New York Times, reporter Jesse Eisenger described the report as “a radical indictment of the nation’s financial system.”

FRONTLINE sat down on Saturday with the Dallas Fed CEO and president, former banker Richard W. Fisher, to talk about the report and its core argument about “too big to fail” institutions. According to their calculation, the five biggest commercial banks — JPMorgan, Bank of America, Citigroup, Wells Fargo and U.S. Bancorp — hold 52 percent of all U.S. deposits, which means the “too big to fail” problem is with us now more than ever.

Dodd-Frank proposes to solve this problem by giving the government “resolution authority” to dismantle a big bank, but Fisher suggests a better solution is to not allow banks to get so big.

Fisher argues that now is an ideal time to solve this problem. Regulators feared that aggressive steps to end the “too big to fail” problem during the crisis would further destabilize an already delicate system. But now that the financial system is healthier, and the normal lending and borrowing that keeps the system liquid has been restored, the risks have lessened.

FRONTLINE producer Michael Kirk (Inside the Meltdown, The Warning) interviewed Fisher for our upcoming series Money, Power and Wall Street, airing April 24 and May 1 (check local listings).  In this special four-hour investigation, FRONTLINE will tell the inside story of the struggles to rescue and repair a shattered economy, exploring key decisions, missed opportunities, and the unprecedented and uneasy partnership between government leaders and titans of finance that affects the fortunes of millions of people around the world.