Hoping to end “too big to fail” and “too big to jail,” Sen. Bernie Sanders, I-Vt., and Rep. Brad Sherman, D-Calif., on Tuesday proposed legislation that would require the government to break up the big banks and financial institutions that threaten the country’s economic stability while also paving the way–finally–for criminal prosecutions.

“We have a situation now where Wall Street banks are not only too big to fail, they are too big to jail,” Sanders said. “That is unacceptable and that has got to change because America is based on a system of law and justice. In my view, no single financial institution should have holdings so extensive that its failure could send the world economy into crisis. At the very least, no institution, no CEO in America should be above the law. If an institution is too big to fail, it is too big to exist.”

Sanders and Sherman were joined in their efforts later in the day by a bipartisan group of lawmakers who sent a letter to federal regulators imploring them to speed up new rules aimed at preventing more taxpayer-funded government bailouts of big banks. Those new stipulations would also ensure shareholders and creditors would be responsible for losses incurred by financial institutions. The letter signing senators included frequent Wall Street critic Elizabeth Warren, D-Mass., Sherrod Brown, D-Ohio., David Vitter, R-La., Bob Corker, R-Tenn., and Susan Collins, R-Maine.

Naturally, Wall Street sees no need for more regulations. But unfortunately for Main Street Americans still reeling from the last financial crisis, President Obama may turn out to be the banking industry’s biggest ally.

The Hill: The Obama administration and financial regulators have been adamant that the Dodd-Frank law will put the issue of bailouts to rest once the rules are fully implemented. While the market might still perceive big banks as enjoying some form of implicit government backing, the administration contends that bank bailouts are a thing of the past, and that watchdogs will soon have the tools they need to take apart ailing financial institutions with minimal collateral damage. Wall Street couldn’t agree more. …Lawmakers like Sanders and Sherman, meanwhile, argue more legislation is the only way to fix what they see as Dodd-Frank’s flaws. Read more

— Posted by Tracy Bloom.