"Too Big to Fail" Measure Passes Key Test; Still, It's a Long Shot

(MoneyWatch)  Legislation that would let Congress dismantle financial companies deemed "too big to fail" cleared an important hurdle today when it was passed by the House Financial Services Committee.

"I remember the dire situation we faced last fall, and we want to do everything we can to avoid such a situation in the future," said Sen. Paul Kanjorski, D-Pa., sponsor of the measure, in a statement. "Looking forward, we have the capabilities to try to act in a preventative manner for the sake of every American and our economy. Most of us yearn for the day when the phrase 'too big to fail' is no longer a part of our vocabulary."

The big question, of course, is whether the Kanjorski amendment will ever make it into law. Probably not. A similar measure would have to run the gauntlet in the Senate Banking Committee. The panel is chaired by Connecticut's Chris Dodd and includes influential Democrats such as Charles Schumer of New York, not to mention Republicans not typically known for going after the banking industry.

It's one thing for Sen. Bernie Sanders, of the great, deep blue state of Vermont, to go after financial titans in backing such a bill. But I have a hard time believing that two lawmakers from states full of large financial services companies, otherwise known as campaign contributors, would support a bill that in principle could lead to the break-up of, say, Goldman Sachs (GS), Citigroup (C) and JPMorgan Chase (JPM). With midterm elections coming up next year, that's the kind of move that would make key constituents most unhappy.

If the measure did make it to the floor, it's not at all clear it could garner the required 60 votes to become law. Whatever the merits of this legislation, the odds here are very long.