The Fiscal Times: Opinion: David Daven: Here’s How to Ensure that Big Banks Don’t Need Another Bailout in the Future

This post was originally posted at The New Democrat on Blogger

Looking back at with six-years of hindsight I’m not sure if I would’ve voted for TARP or the Troubled Asset Relief Program  if I was a member of Congress back in 2008. For one even I didn’t vote for it, it would’ve passed anyway. So it wouldn’t been like the banking system was going to collapse because without this taxpayer, but debt funded relief package wasn’t going to go to the failing banks. But also there were better options on the table like breaking up these failing banks. Bankruptcy and perhaps most importantly not putting TARP on the national debt card, but having it paid for from the start.

Now a couple of options that I would’ve liked to of seen President Bush and Congress back in 2008 take and had these options not of made it into the banking relief package perhaps they become part of Wall Street financial reform in 2010 that was passed by Congress that became the Dodd-Frank Financial Reform bill of 2010, named after Senator Chris Dodd and Representative Barney Frank.

First of all breaking up big banks so they don’t get so big and become so important in the economy that if they fail that could hurt the economy. So once a bank gets to a certain point, the Feds perhaps the Federal Deposit Insurance Corporation steps in and says “you are too big now and you have to sell off some of your assets to get down to a healthier size at market value”.

Second forcing banks of all size or at least up to a certain size to pay for bankruptcy insurance. So when they do go under they have a choice. Either collect from their bankruptcy insurance that they paid into, or file for bankruptcy. But no longer would they be eligible for a taxpayer bailout.

Hindsight of course is 20/20, but there were already other and better options on the table in 2008 when TARP was passed on an emergency basis and seen as something that had to be done right then as is. And in 2010 when Congress and now President Obama being in charge, but instead came up with the best compromise they felt they could so they could get something done.