Rep. Johnson explores antitrust law's possible role in financial crisis
In particular, Johnson and his colleagues investigated consolidation of the banking industry and the vast amount of public money used to stabilize banks and other financial institutions rocked by toxic mortgage assets, and asked the fundamental question – are there institutions that are “too big to fail?”
The hearing came amid the fervor over millions of dollars in bonuses paid to American International Group Inc. executives despite the company receiving $170 billion in taxpayer money to keep it afloat.
AIG is among a handful of financial institutions deemed “too big to fail” and if allowed to collapse could do far more destruction to the economy.
“It is not my intention here today to suggest that either the previous or current administrations should have sat idly by as the economy plummeted,” Johnson said. “I believe that my colleagues on both sides of the aisle can agree that the intention of both administrations was to protect a fragile economy from destabilizing further. Our purpose here is to determine whether this economic downturn was worsened by antitrust.”
Johnson pointed out that if there are banks and financial institutions that are so big that we cannot allow them to fail, then should antitrust law have prevented them from becoming so embedded in the economy?
And if the government uses public money to maintain one institution that in turn uses some of those funds to buy out a smaller competitor, is it violating the foundation of free market principles by giving a lending hand to one institution over another?
Witnesses with backgrounds in banking, antitrust law, financial services and consumer protection weighed in on whether there is a need for more regulation to prevent financial institutions from becoming “too big to fail” or whether antitrust law is robust and doing its job to protect consumers from abuses.
Recommendations made at the hearing moving forward included appointing an assistant attorney general to protect competition policy during a recession and emergency consolidations, reconstituting the President’s Working Group on Financial Markets to allow for congressional oversight and even creating legislation allowing Congress to halt the formation of entities deemed too big to fail.