The Republican Party’s 2012 vice presidential candidate:
Banks are getting really big, and they are using the value of their insured deposits to go do other things that are really not banking and jeopardizing the stability of the system. … Dodd-Frank goes in the wrong direction. It creates a permanent bailout fund. It deems very large, interconnected banks as too big to fail, meaning the government will back them up if they go down. And that means these really large banks can go into the markets and get money at a much cheaper rate than your community bank. … I also believe in what we call the Volcker rule, which means if you’re going to act like a hedge fund then be a hedge fund. If you’re going to be a bank, then you have to be regulated like a bank. Meaning separate the ability of banks to take the implied subsidy of insured deposits and leverage that. I think that was one of the mistakes that was made.
Rep. Paul Ryan made those remarks (h/t to Think Progress) at two recent town hall meetings back in his Wisconsin district. Ryan also said he had some problems with the Brown-Vitter beak-up-the-megabanks legislation, “though the idea is one I find appealing.”
Stop the presses. If Ryan accepts the need to go beyond the Volcker Rule to somehow shrink or restructure the nation’s largest financial institutions, that would be a game-changing bit of political support for the idea. If there is a center-right permission structure for breaking up the biggest banks, Ryan would be a key component.
Once the premise is accepted, then it’s just a matter — though hardly a small one — of figuring out the best way of going about it: size caps, activity restrictions, dramatically higher capital. Now, I don’t know if Ryan is quite there yet, but we may find out when the Government Accountability Office releases its estimate of the TBTF subsidy currency enjoyed by the biggest financial institutions. If Ryan or any other Washington politician is looking for a jumping on point, that might be the moment.