Four questions to ask before breaking up the banks (Aaron Klein, Brookings)

Calls to break up the “big banks” remain part of the political and economic discourse, and understandably so. The financial crisis of 2008 has left a severe scar on the American economy and continues to impact the lives of millions of families. While leaders in charge during both the Bush and Obama Administrations rejected the idea of breaking up the big banks, significant and vocal supporters of break-up on both ends of the political spectrum continue to press their case including presidential candidate Bernie Sanders and former candidate Rick Perry. The debate often focuses on important questions of whether the current post-reforms of the Dodd-Frank financial regulatory structure are sufficient to solve problems of systemic risk, financial stability, and too-big-to-fail, or whether a more radical approach is warranted. However, that framing is too narrow to produce the right answer.

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Aaron Klein, Brookings, is a fellow in Economic Studies and serves as policy director of the Initiative on Business and Public Policy. Previously, Klein directed the Bipartisan Policy Center’s Financial Regulatory Reform Initiative and served at the Treasury Department as deputy assistant secretary for economic policy.