The Red Line

Senators from both sides of the political divide are displaying an encouraging resolve to break up the country’s biggest banks. Unfortunately, they’re focusing too much on the complexity of big bank operations and ignoring the greater threat entailed in their enormous size.

There were many happy faces in Washington on Friday with the Treasury Department’s announcement of robust tax revenues for April. Individual income-tax receipts surged to $240 billion for the month, taking the total for 2013 to $483 billion. This is far greater than the $393 in tax revenues the federal government collected for the first four months of 2012. The increase far surpassed the Congressional Budget Office projections in February.

The influx surprised the CBO and many other observers, but it shouldn’t have. Neither should the dramatic drop that is likely to follow, though policy makers will be tempted to behave as if the revenue flood will continue.

If we decide to break up the big banks, can we actually do it?

The first and most obvious proof that we can lies in the 2010 bank-regulation law, the Dodd-Frank Act, which requires America’s too-big-to-fail banks to submit plans — so-called living wills — outlining how they can be dismantled if they get into trouble. So these banks have already provided breakup blueprints.

All that is required is to remove the conditionality and change the timing: Break them up now, not when and if. And what could be easier than doing so according to their own instructions, and so, once and for all, eliminate the systemic risk posed by the biggest and riskiest banks?

All the debate about the pros and cons of a Greek exit from the euro area is missing the point: A German exit might be better for all concerned.

Unless Europe’s leaders take some kind of radical action, such as adopting and executing some of the many reform ideas they have floated, the currency union is headed for disintegration.