After TARP was blocked in the House, the program was retooled. Not a dollar of taxpayer money was used to purchase toxic assets. Instead we bought preferred stock, a much better investment, and our losses a small fraction of what they would have been.
 

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Today the biggest banks have an unfair competitive advantage through access to a lower-cost capital. Since they are regarded as “too big to fail,” they can receive loans at a lower rate because they have a safety net that the small and medium sized banks don’t have: the backing of the US taxpayer. This should not be – every financial institution should compete for capital based on the soundness of its balance sheet, and no financial institution should be able to claim that there is a special federal safety net available to its investors because of the institution’s sheer size.
 
The financial regulatory reform we passed under the Dodd-Frank Act already tasks the Federal Reserve and other regulators to identify the financial institutions that are so big that if they were to fail it would be a systemic problem for the country. The problem is, once these banks are identified, what should we do about it?  Regulators, including the Fed and the Treasury have the authority under the Dodd-Frank to break up the largest banks, but it is highly unlikely they will use that authority. I believe that once we identify an institution as too big to fail, we must force it to divide.
 
Every protozoa has the intelligence to divide once it reaches a certain size, and the division is necessary to maintain health. Certainly the brilliant men and women on Wall Street are capable of intelligently dividing their behemoth firms.
 
Never again should a financial institution be able to claim: “if we go down, the U.S. economy is going down with us.” By breaking up these institutions long before they face a crisis, we ensure a healthy financial system where all firms can compete in the free market. No longer should giant financial institutions be able to get low-cost capital by telling investors that even if the institution is mismanaged it will be able to obtain a bailout from the federal government. That is why I have introduced the “Too Big to Fail, Too Big to Exist Act,” (HR 4963). This bill mandates the break-up of any institution identified by the regulators in the Dodd-Frank process as too big to fail. The legislation is similar to legislation authored by Sen. Bernie SandersBernard (Bernie) SandersWorld leaders reach agreement on trade deal without United States: report Sanders on Brazile revelations: DNC needs ‘far more transparency’ Sen. Warren sold out the DNC MORE (I–Vt) and introduced in the 11th Congress and legislation authored by Sen. Sherrod BrownSherrod Campbell BrownTrump tells Senate Dems that 'rich people get hurt' in GOP tax plan Senate panel approves North Korea banking sanctions Trump names Powell as chairman of Federal Reserve MORE (D-Ohio) and recently introduced in the 112th Congress.
 
My legislation is cosponsored by Rep. Maurice Hinchey (D-N.Y.) and I invite additional cosponsors.

Rep. Sherman (D-Calif.) is a member of the House Financial Services Committee.