Neel Kashkari big banks

Breaking big banks and the too-big-to-fail-debate

The newest Federal Reserve policymaker just put forth a radical proposal. Neel Kashkari thinks America’s big banks should be broken up, the sooner the better.

Neel Kashkari big banks

California Republican gubernatorial candidate Neel Kashkari speaks during a Bloomberg West Television interview in San Francisco, California, U.S., on Friday, Feb. 28, 2014. Kashkari, former head of the U.S. Treasury’s bank bailout program, discussed his decision to run for governor in California and his strategy to stimulate manufacturing and employment in the state. Photographer: David Paul Morris/Bloomberg via Getty Images February 28, 2014| Credit: Bloomberg

This opinion comes from the man who once directed TARP, the Troubled Asset Relief Program that bailed out giant banks in the Great Recession. Kashkari was assistant secretary of the Treasury at that time. This year, he became president of the Federal Reserve Bank of Minneapolis, two years after running for governor of California.1

The above reforms would require the approval of Congress

On February 16, Kashkari spoke at the Brookings Institution and delivered, as one Bloomberg article put it, “a speech that [read] like a cover letter on a resume sent to the White House c/o Bernie Sanders.” Specifically, he called for “serious consideration” of three ideas.1 

The first: “Breaking up large banks into smaller, less connected, less important entities.” The second: “Turning large banks into public utilities by forcing them to hold so much capital that they virtually can’t fail (with regulation akin to that of a nuclear power plant).” The third: “Taxing leverage throughout the financial system to reduce systemic risks wherever they lie.”1

While the Dodd-Frank Act of 2010 increased regulation of behemoth banks, Kashkari is hardly satisfied with it. As he told the Washington Post recently, “Policymakers have been telling Congress, or maybe Congress has been telling the American people, that Dodd-Frank has solved too big to fail. And I’m saying I don’t believe it.”2

So Kashkari wants to deliver a proposal to Capitol Hill, with input from “leaders from policy and regulatory institutions [and] the financial industry.” All of these parties would convene to “offer their views and to test one another’s assumptions” pursuant to a bill.1

Is breaking big banks a necessary reform?

Many voices on Wall Street contend that Dodd-Frank was actually unnecessary, that the credit crisis of the late 2000s never would have occurred if markets, regulators, and Congress had simply abided by existing rules.1,2,3,4 

 Others have called for big banks downsizing before this, including some Fed officials. In 2012, the Dallas Fed put out an annual report entitled Choosing the Road to Prosperity: Why We Must End Too Big to Fail – Now. Its president, Richard Fisher, has talked of restructuring large banks into “multiple business entities.” St. Louis Fed president James Bullard once introduced the idea of limiting the size of individual U.S. banks to a percentage of annualized GDP.3,4

Sanders Clinton Debate in Miami big banks

Democratic presidential candidates Hillary Clinton (R) and Bernie Sanders shake hands before their debate at Miami Dade College in Miami on March 9, 2016. / AFP (Photo credit GASTON DE CARDENAS/AFP/Getty Images)

Of course, not too long ago the federal government helped make the biggest banks even bigger. As it decided certain financial institutions were “too big to fail” during the credit crisis, it also brokered some deals: Bank of America bought up Merrill Lynch and JPMorgan acquired Washington Mutual and Bear Stearns. JPMorgan and Bank of America both received significant help from TARP as a consequence. Taxpayers made a profit on TARP, and Kashkari says TARP was the right move at the right time. However, he prefers that history not repeat.1,5

 The “too big to fail” idea contends that the nation’s largest banks need a federal backstop if threatened with collapse, because their failure would wreck the economy. Its adherents argue that a giant bank is a better bank, providing more services here and in emerging markets, benefiting from economies of scale that make their services cheaper than services of smaller banks. These banks, the thinking goes, deserve a safety net in a catastrophe.1,2,3,4

To other observers, the top U.S. banks have grown frighteningly large. An analysis conducted by SNL Financial last year found that just five banks held almost 45% of the U.S. banking industry’s total assets in 2014, about $7 trillion. To put this in perspective, World Bank data shows the entire 2014 U.S. GDP at $17.4 trillion.6,7

 In time, market forces may actually accomplish what Kashkari would prefer to see

With TARP long gone, the largest banks have had to bolster their capital ratios, a potential disadvantage as they compete with smaller banks and online lenders. So new competitors (and new lending and financial services platforms) could soon emerge to take away some of their business.1 

 Kashkari does not want to wait

With the economy in comparatively good health, “the time has come to move past parochial interests and solve this problem,” Kashkari said in his February 16 speech. “The risks of not doing so are just too great.”5


Aquiles Larrea Jr. AIF® may be reached at 212-390-8918 Option 1 or



1 – [2/17/16]

2 – [2/17/16]

3 – [3/22/12]

4 – [2/16/16]

5 – [2/17/16]

6 – [4/15/15]

7 – [2/18/16]


Border security undocumented immigrants

2016 Presidential candidates on economic impact of undocumented immigrants

At the moment, it is clear that some 2016 Presidential candidates are riding on anti-immigration sentiments to gain popularity. All running candidates have expressed their political positions regarding undocumented immigrants but something important is lacking in their views.

Border security undocumented immigrants

IO GRANDE CITY, TX – DECEMBER 07: A one-year-old from El Salvador clings to his mother after she turned themselves in to Border Patrol agents on December 7, 2015 near Rio Grande City, Texas. They had just illegally crossed the U.S.-Mexico border into Texas. The mother said she brought her son on the 24-day journey from El Salvador to escape violence in the Central American country. The number of migrant families and unaccompanied minors has again surged in recent months, even as the total number of illegal crossings nationwide has gone down over the previous year. (Photo by John Moore/Getty Images)

Although still a controversial issue, many economy experts have revealed that granting legal status to all undocumented immigrants as part of a comprehensive immigration reform and permitting them to legally work in the United States would increase local and state tax contributions by an estimated extra $2.1 billion a year.

The nationwide benefit would be an average increase of 8.6 percent in tax revenues. The most significant revenue gain of about 55 percent would be derived from personal income tax, due to both increased earnings and total compliance with the tax laws.

The reality of undocumented immigrants around the country

Founded in 1962 by Cesar Chavez, the United Farm Workers of America is the nation's first successful and largest farm workers union currently active in 10 states.

Founded in 1962 by Cesar Chavez, the United Farm Workers of America is the nation’s first successful and largest farm workers union currently active in 10 states.

Over the past few years, many states have started to offer undocumented immigrants access to schools, housing, health services, driving licenses and even jobs that Americans do not want. But the one persistent question that always comes up is “do these undocumented immigrants pay taxes in return for the social and other services they are provided by the US?” The data on this topic are confusing and it depends on what one reads and to whom one listens. However, the reality is that undocumented immigrants do pay billions of dollars in state and federal taxes each year. The other fact is that the US would benefit even more if many more undocumented immigrants were granted a pathway to citizenship.

State and Federal tax data indicate that about $11.6 billion were paid in 2013, with the lowest taxes in Montana ($2.2 million) where 4,000 undocumented immigrants reside to more than $3.1 billion in California, which is home to more than 3 million undocumented immigrants.

Like all Americans, they also pay sales and excise taxes when they pay for goods or buy services -such as gasoline, utilities, and clothing. Further these undocumented immigrants also pay property taxes. Current evidence indicates that at least 50 percent of these undocumented immigrant homeowners also file income tax returns using Individual Tax Identification Numbers (ITINs). However, there are countless more of them who never file income tax returns but still have their employers deduct taxes from their paychecks.

President Obama’s executive actions are not enough

Undocumented immigratns and President Obama

Thousands of undocumented immigrants are waiting for their time to become Americans. (

President Obama did undertake executive action in 2014 to grant relief to eligible individuals who came to the US as children and to eligible parents of children who are citizens or lawful permanent residents. However, this executive action is still under review by the US Supreme Court. To make matters worse, there are some presidential candidates who are vehemently anti-immigration and have vowed to rescind President Obama’s executive order if they get elected.

The exact number of undocumented immigrants in the USA is not known but at least 11 million of these individuals have contributed to taxes in the USA as of 2013. It is believed that there are perhaps at least 5-7 more million undocumented immigrants who make no contribution, partly because they live in fear of deportation if they were to divulge personal data to the tax authorities.

So where do the 2016 Presidential race candidates stand on immigration?

Overall it appears that both candidates running for the Democratic Party, Sanders and Clinton, have voiced similar positions on the issue of immigration and undocumented immigrants. But there are differences…


Secretary of State Hillary Clinton

Secretary of State Hillary Clinton has gone on record and said, “Of the people, the undocumented people living in our country, I do not want to see them deported. I want to see them on a path to citizenship.” Further, Clinton has called for an end to deportation raids of undocumented immigrants who have been fleeing violence in Central America. She has further stated, “Our immigration enforcement efforts should be humane and conducted in accordance with due process, and that is why I believe we must stop the raids happening in immigrant communities.”

Hillary Clint Women’s History Month Celebrating women in a Presidential campaign year

The former first lady, Senator and Secretary of State also defended her border security record stating she voted numerous times “to spend money to build a barrier to try to prevent illegal immigrants from coming in. And I do think you have to control your borders,” having to later apologize for her use of the term “illegal.” She has also stated that deporting the children, many of whom are seeking asylum, would send a “responsible message” that would deter Central American families from sending their children to the United States.


Vermont Senator Bernie Sanders

Senator Sanders’ views on the issues of illegal immigration have also been on the side of comprehensive immigration reform. “We don’t need a wall and we don’t need barbwire. We need to fix our broken criminal justice system…we need to take 11 million undocumented people out of the shadows, out of fear, and we need to provide them with legal protection, and we need to provide them with a path toward citizenship.”

Mr. Sanders, a Vermont independent running in the Democratic primary, said he would grant a blanket stay without threat of deportation to nearly 9 million undocumented immigrants who have been at least five years in the country. He promised that within his first 100 days as president he would expand President Obama’s executive actions.


Republican candidates agreement on undocumented immigrants

If there is a topic in which all the Republican candidates have a similar position, this topic is strong opposing views to comprehensive immigration reform.


Texas Senator Ted Cruz

Senator Ted Cruz, the son of immigrants himself, recently stated, “What you do is, you enforce the law…” Cruz has also been very vocal about deportation and enforcing border patrol. On Jan 28, 2016, at the primary presidential debate he further stated that, “Listen, we can solve immigration. I have a detailed immigration plan designed with Iowa’s own Congressman Steve King and Jeff Sessions, and…We have the tools in federal law to do this now. We can build the fence. We can triple the border patrol. We can end sanctuary cities by cutting off…funding to them. We can end welfare for those here illegally. If I am elected president… we will secure the border…and we will end the illegal immigration.”

ted-cruz-obamacare undocumented immigrants Ted Cruz comments damage the Latino brand and leadership

Ohio Governor John Kasich

Ohio Governor John Kasich, another Republican running for the Presidency, has very similar beliefs as Cruz. At the presidential debate in February he said, Look, the situation is, we need to finish the border. And we can have a guest worker program, where people can come in and out in an orderly way. And then for the 11.5 million that are here, if they have not committed a crime since they’ve been here, I believe they ought to pay some back taxes, pay a fine, never get on the path to citizenship, but get legalization. .And we’ve got to get this done. And I will tell you this, within the first 100 days that I am president, I will put that proposal to the Congress.”


Donald Trump

And finally there is Donald Trump, whose entire campaign has been riding on forcing “illegal” immigrants back home and building a wall. His rhetoric on immigration and other minorities have often resulted in violent clashes at his campaign rallies. Just a few weeks ago, Trump went on to say, “I have a very hardline position, we have a country or we don’t have a country. People that have come into our country illegally, they have to go. They have to come back in through a legal process. I want a strong border. I do want a wall. I know how to build.”

"You are fired!" the famous imprint of Presidential hopeful Donald Trump Hispanic values: Why there will never be a “Latino Donald Trump”

He has further stated that, “We’re talking about security. We’re not talking about religion. People are pouring across the southern border. As far as other people like in the migration, where they’re going, tens of thousands of people having cell phones with ISIS flags on them? They’re not coming to this country. And if I’m president and if Obama has brought some to this country, they are leaving. They’re going.”

When facts don’t count to sustain a political position

The topic of immigration and undocumented immigrants has created a major division in the country. Republican candidates’ anti-immigrant sentiment and bigotry do not to give any credit to immigrants who have spent most of their lives working and raising children in this country and, as shown by the numbers, benefited the country. They want them all out.

Democratic candidates feel we need to reform the immigration system and accept all those who are already here giving them a new lease on life. But do they, really? And if they do, can they?

Any definitive reform in the status of undocumented immigrants will have to wait until the elections are over later this year, and even further depending on the new President and his or her election promises. Once again, undocumented immigrants and their voting families are being played with promises that never seem to be fulfilled. And that is a tragedy for thousands of waiting families.

However, the real tragedy is that none of the Presidential candidates has based their positions on the economic impact of undocumented immigrants in the USA, a fact that has been easily demonstrated many times.

Undocumented immigrants local and state tax contributions by state. Source: