Nov. 6 (Bloomberg) -- U.S. Senator Bernie Sanders unveiled legislation requiring Treasury Secretary Timothy Geithner to name banks whose collapse may shake the economy and break up the firms in a year, fueling efforts to end taxpayers bailouts.

“If an institution is too big to fail, it is too big to exist,” said Sanders, a Vermont independent. “We should break them up so they are no longer in a position to bring down the entire economy.”

The legislation would give Geithner 90 days to list the commercial and investment banks, hedge funds and insurance companies deemed “too big to fail.” Those firms would be broken up within a year, he said. Representative Paul Kanjorski, a Pennsylvania Democrat, is considering a measure in the House that would break up large financial firms.

Lawmakers seeking to end taxpayer bailouts are considering measures aimed at limiting the size of companies that pose a risk to the financial system. Congress last year set up the $700 billion Troubled Asset Relief Program to shore up Citigroup Inc., Bank of America Corp. and other firms.

“We should end the concentration of ownership that has resulted in just four huge financial institutions holding half the mortgages in America, controlling two-thirds of the credit cards, and amassing 40 percent of all deposits,” Sanders said, citing Bank of America, Citigroup, JPMorgan Chase & Co. and Wells Fargo & Co.

Kanjorski, chairman of a House Financial Services Committee panel on capital markets, this week said he was preparing a measure giving the government power to break apart large firms.

‘Gigantic Tsunamis’

“Nowhere in the world in the future will there be gigantic tsunamis coming out of nowhere and striking the entire world’s economy,” he said on Nov. 4.

The Kanjorski measure would amend Chairman Barney Frank’s draft legislation that creates a regulator council to monitor the economy and firms for systemic risk. The committee today considered proposals to change Frank’s measure, and the chairman has said a final vote by members is scheduled Nov. 20.

“Discussion of breaking up large financial institutions that pose systemic risk to the market is gaining traction on the Hill,” FBR Capital Markets analysts led by Paul Miller said in an investor note Nov. 4. “This legislation is currently in its infancy, and Congress has a number of difficult questions to answer before anything can move forward.”

Federal Reserve Governor Daniel Tarullo said Oct. 21 the idea of breaking up large institutions is impractical, calling it “more a provocative idea than a proposal.” Instead, he said any firm that may pose a risk should be subject to stricter oversight. Former Fed Chairman Alan Greenspan on Oct. 15 said regulators should consider breaking up systemically risky firms.

The New York Times reported the Sanders’ legislation earlier today.

To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net.

Last Updated: November 6, 2009 15:54 EST