Financial behemoths no longer will become too big to fail and create the kind of havoc that happened to the economy over the past two years, the Pennsylvania Democrat told CNBC in an exclusive interview.

"This really goes back to the concept that corporations now have been allowed to grow to such an extent that they actually are greater than any single government on Earth," Kanjorski said. "This is a fight between corporate megalomania and democratic capitalism."

Kanjorski subsequently told Reuters that the power to determine whether an institution is so big that it could endanger the system will reside with the Financial Services Oversight Council but require presidential consultation.

The concept of too big to fail soared onto the public landscape when Lehman Brothers collapsed in September 2008 beneath the weight of risky mortgage-backed securities in which it invested.

Several other large institutions whose tentacles spread throughout the financial system also teetered on the brink of insolvency during the crisis. Government officials worried that if the firms went down they would bring the entire economy with them.

Kanjorski's amendment will become part of legislation establishing a resolution authority to deal with the too-big-to-fail concept.

JPMorgan Chase CEO Jamie Dimon wrote an opinion piece last week for the Washington Post agreeing with Kanjorski's sentiment that poorly run institutions ought to be allowed to fail.

However, he contended that the government should not base its decisions solely on size.

Those concerns were echoed in a separate CNBC interview with Rob Nichols, president of Financial Services Forum, an industry advocacy group.