Democrats are creating proposals in Congress that are designed to limit the size and complexity of financial companies so that any collapse wouldn't damage the broader economy, a sign that lawmakers are responding to anti-Wall Street sentiment by toughening the administration's rewrite of finance rules. The proposals if passed would allow the government to break up "healthy" financial companies, and in some cases one possible outcome could be barring commercial banking firms and investment banking firms from merging. Large financial companies are nervously watching the debate. Lobbyists for large financial-services companies, for example J.P. Morgan, scrambled in recent days to reach out to Capitol Hill aides. Rep. Paul Kanjorski (D., Pa.), a top lawmaker on the House Financial Services Committee, plans to offer an amendment to the bank-regulation bill currently before Congress that would allow the government to take preemptive steps limiting the size, complexity or risk of any financial company. Officials could intervene if specific conditions are met that signal a company poses a threat to the economy. The Obama administration recently said it supported a bill giving the Federal Reserve limited powers to force companies to sell assets or stop certain activities if the firm's size or scope threatens the broader economy.
If passed this law could protect the consumers and everyone who would not benefit, including the economy, from a merger of big commercial banking firms and investment banking firms.
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