I support businesses making profits, growing the business, employing people, making the owners money. But bad decisions in business have consequences. Huge bad decisions in huge businesses should have huge consequences.

Banks used to be valued based on the value of the loans they held. The laws were changed, so banks are valued based on the value of the collateral for the loans. A drop in housing prices of a few percent, which happens regularly, now meant that banks with highly leveraged mortgage loans could be bankrupt — a 3% drop in housing prices in a bank lending 33 times more than the cash they had, is bankrupt in the new accounting. (Insurance companies invested essentially identically to banks, but are still valued based on the loan amounts, and insurance companies didn’t fail.)

The big banks say they didn’t know that changes in how their business was valued meant their investments were at such risk — they therefore acted recklessly (ignoring the changed financial environment, ignoring potential consequences to their business), or they did know and acted deliberately, harming millions of people.

(The laws probably should be changed, so a normal or unusual change in housing prices doesn’t bankrupt a bank, if the bank loaned money responsibly.)

We couldn’t allow the economy to crash, from their reckless or harmful actions. We should penalize the people responsible for the harm their actions caused — strong enough penalty to fit the harm they caused.

Big banks are continuing to risk the same way they did before the financial crash. They now clearly know the potential consequences to the national/global economy. They obviously need to learn the risk to their own financial health.

The risk to the national economy didn’t dissuade the industry leaders from investing in ways that could ruin the company. The risk to their shareholders didn’t dissuade them. The small chance of personal financial ruin didn’t stop them from going for the huge probability of huge financial gain.

If low risk of personal bankruptcy if their business failed, didn’t dissuade them, we have to make the consequences more likely and more severe, and we have to make the benefits lower. We can’t allow them to crash the economy again.

There are benefits of big banks, including people feel more comfortable putting their money in a well-known bank. Big banks can make bigger loans, for growing large businesses, for huge important projects. But they have to run the business so they can handle mistakes, failures, bad loans, changes in the economy.

There is a petition you can sign, if you think banks should be split: http://petitions.moveon.org/sign/action-tell-obama-to/

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