Despite strong opposition from the financial industry, yesterday the House Financial Services Committee managed to pass an amendment from Rep. Paul Kanjorski that he says would end the practice of “too big to fail,” allowing regulators to break up giant banks and disallow certain mergers.

The bill would give a proposed new council of regulators the right to dismantle firms whose scale could hurt the economy – even if they are healthy.

Wall Street is opposed to such a measure, which is part of efforts to overhaul the banking industry.

But it will have to go through several more steps before it becomes law.

“No firm should be considered to be too big to fail,” said Democrat Paul Kanjorski, who sponsored the proposal.

“Financial firms that want to play in a casino need to have their own resources to cover their bets and not assume that tax dollars are available in reserve if their bets fail,” he said.

The vote was 38-29, with Democrats Gregory Meeks (NY), Dan Maffei (NY) and Melissa Bean (IL) joining all Republicans in opposition.

There is similar though not the same language in Chris Dodd’s draft bill in the Senate Banking Committee. However, the most wide-ranging bill of this type comes from Bernie Sanders, who authored a brief, two-page bill which would give the Treasury Secretary one year to break up any bank over a certain size limit.

Rep. Kanjorski described his proposal in The Huffington Post.