"We had a group that came in and said, 'We don't need regulators. Let's just throw the referees off the football field and see what football's like without any referees.' And we found out: It's pretty ugly. We went down a path that turned out to be a dead end, and it almost destroyed the country," Kaufman said. "We need to get back to a time where we have referees on the field watching what goes on."
But it is Kaufman's push to break up the country's biggest banks that has earned him raves from such leading experts as Simon Johnson, former chief economist at the International Monetary Fund.
"Sen. Ted Kaufman is a strident critic of our current financial system and a tough voice for greatly strengthening the Dodd bill," Johnson recently wrote on his blog the Baseline Scenario. "Sen. Kaufman," he said, "is exactly right to press for more."
In a statistic Kaufman frequently cites, 15 years ago the six biggest U.S. banks had assets that equaled 17 percent of the nation's gross domestic product. Today that number has soared to more than 63 percent of GDP. Three banks have nearly $2 trillion in assets on their balance sheets.
One of these banks is Citigroup, which needed $45 billion in taxpayer bailout money after the financial meltdown in September 2008. At a hearing before the Financial Crisis Inquiry Commission April 8, Robert Rubin, a former senior adviser to Citigroup and Treasury Secretary in the Clinton administration, told the panel that he was not aware that the bank held more than $40 billion in complex mortgage-backed securities until a few months before the meltdown. That, Kaufman said, is evidence that these banks have grown too large -- top executives do not even know what is happening on their watch.
"Too big to manage, too big to regulate, and too big to fail -- there are a lot of indications that these banks are just too big," he said.
White House adviser Paul Volcker's proposal to ban big commercial banks, whose deposits are FDIC insured, from engaging in "proprietary trading," a risky but profitable activity, could help. "If banking institutions are protected by the taxpayer and they are free to speculate, I may not live long enough to see the crisis, but my soul is going to come back to haunt you," Volcker, a former president of the Federal Reserve, told Dodd's Senate Committee on Banking panel in February.
Earlier this week Kaufman and a group of other Democratic senators proposed a bill that would cap the size of banks by dictating that they cannot hold liabilities of more than 2 percent of GDP, or 10 percent of the total bank deposits in the country. Bank of America, Wells Fargo, and JP Morgan Chase would be the three banks immediately impacted by such a bill.
Kaufman is not a member of the Senate Banking Committee, so his influence has been limited. But the Delaware senator has already left a lasting mark as a member of the Senate Judiciary panel on fighting financial fraud.
Last January, on his first day in office, Kaufman's fury at Wall Street after the financial meltdown incited him to go to the Judiciary panel's chairman, Sen. Patrick Leahy, D-Vt., and voice support for the creation of a task force to go after financial fraud. A few months later, President Obama signed the Leahy-Grassley-Kaufman bill into law. And last fall the president formed a task force to improve communication among regulators.