The leading intellectual opponent of “Too Big To Fail” (TBTF) banks is likely economist Simon Johnson.  Johnson declared victory recently by stating the debate on TBTF was “over.”  In his New York Times column, Johnson declared, “(T)he decision to cap the size of the largest banks has been made. All that remains is to work out the details.”

Since 2008 the headlines have been rife with bank scandals.  Beginning with the record bailouts in 2008 and 2009, banks have been sanctioned and fined for selling worthless mortgages, manipulating the Libor, abusing customers in the foreclosure process and laundering money for drug gangs and terrorists.

JPMorgan’s $6 billion London Whale trading loss added more fuel to the fire.  This March, a U.S. Senate Subcommittee found JPMorgan traders exceeded the firm’s own trading limits and disguised their losses.

This torrent of bad news has generated public demand for greater accountability.  In recent polling a majority of Americans favor breaking up the nation’s TBTF banks by a 2-1 margin.

It has been a momentous time for the advocates of ending TBTF institutions.  On March 22,^, 2013, the U.S. Senate voted to end implicit subsidies enjoyed by the six largest banks in the country.  Although the measure was symbolic and had no legal effect, it passed by a unanimous vote of 99-0.

Also in March, Federal Reserve Chairman, Ben Bernanke stated TBTF banks were a major source of the crisis. He warned that, “we will not have successfully responded to the crisis if we do not address that successfully.”

On the political right, conservative Republican Senator David Vitter is an initial co-sponsor of the “Terminating Bailouts for Taxpayer Fairness Act.”  This legislation would require TBTF banks to raise more capital, shrink or break up.   The Conservative Political Action Committee recently hosted Richard Fisher, President of the Federal Reserve Bank of Dallas.  Fisher informed the audience that TBTF banks were a threat to the stability of the economy and a vestige of crony capitalism.

On the left, Democratic Senator Sherrod Brown is also a sponsor of the, “Terminating Bailouts for Taxpayer Fairness Act.”  Additionally, Attorney General Eric Holder has expressed his concern that prosecuting executives at TBTF institutions could harm the economy, complaining, “some of these institutions have become too large.”

Are the skids greased to break up the largest financial institutions?  Is it all over but the voting?

Not so fast.

While the advocates of ending TBTF banks have made significant progress, there are still barriers to wholesale change.

The forces supporting the largest financial institutions are more organized, better financed and have a successful track record of defeating bank size limits.  Specifically, they defeated an amendment to limit the size of banks in the 2010 in the Dodd-Frank Wall Street Reform and Consumer Protection Act.

These same organizations and the banks themselves continue to oppose size limitations.  They argue restrictions will mean less credit for businesses and consumers, as well as, massive job losses.  Other arguments against limits will include higher banking fees, neighborhood branch closures and the government takeover of private industry.

Moreover, neither the U.S. House of Representatives nor the White House has demonstrated an interest in ending TBTF.

The House of Representatives, in fact, has been moving in the opposite direction.  Recently, the House Agriculture Committee voted to expand the loopholes in Dodd-Frank.  These changes would allow TBTF institutions to engage in riskier behavior.

In 2010, the White House opposed the amendment to limit bank size during the debate on Dodd-Frank legislation.  More recently the Obama Administration has opposed revisiting issues covered in Dodd-Frank over concerns it could jeopardize the future of the Consumer Financial Protection Bureau.

TBTF financial institutions are larger than they were before the financial crisis.  Economist Johnson has argued this increased size makes the current economy more vulnerable to bank failures.  A growing number of supporters and developments have strengthened the hand of those looking to limit the size of these megabanks.

However, the debate at this time is limited to the U.S. Senate.  While the world’s greatest deliberative body will debate this issue neither the House of Representatives nor the White House have shown any interest in revisiting the Dodd-Frank Wall Street Reform and Consumer Protection Act.