Finance

Big Banks Get To Stay Big

A measure that would have made the nation's biggest banks shrink their balance sheets got voted down in the Senate yesterday.

The vote came as the Senate continued to work through a bunch of proposed amendments to the finance reform bill.

A separate amendment that passed earlier this week gives the government the authority to shut down big, failing financial institutions. That amendment is supposed to get rid of the whole notion of "too big to fail."

But economists across the ideological spectrum have argued that huge financial institutions will always have an implicit government guarantee, because allowing them to fail would be too disruptive to the economy. The only way to end "too big to fail" is to end the "too big" part, Planet Money's Adam Davidson recently reported.

Whether or not that's worth doing is the subject of much debate. Opponents of the amendment argued that managing banks' risk, not size, is the key to reducing the risk of future crises.And, they say, limiting banks' size could hurt their ability to compete in global markets.

Other amendments: A measure that would have moved a new consumer protection agency into the FDIC was voted down. An amendment to audit the Fed was tweaked so that it now calls for a one-time audit of the Fed's emergency lending to banks. Politico has more on both amendments.

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