Too-Big-to-Fail Bill Seen as Fix for Dodd-Frank Act’s Flaws
“Too-big-to-fail” legislation set to be unveiled in Washington is needed to rein in the biggest U.S. banks because the Dodd-Frank Act has failed to guard taxpayers against future bailouts, the bill’s sponsors said.
The four largest banks -- JPMorgan Chase & Co. (JPM), Bank of America Corp., Citigroup Inc. and Wells Fargo & Co -- “are nearly $2 trillion larger than they were” before the 2008 credit crisis, during which they got U.S. aid, Senators Sherrod Brown and David Vitter wrote in a New York Times (NYT) column today.
“The federal help continues -- not as direct bailouts, but in the form of an implicit government guarantee,” wrote Brown, an Ohio Democrat, and Vitter, a Louisiana Republican. “The market knows that the government won’t allow these institutions to fail.”
Brown and Vitter, whose plan is opposed by key lawmakers, are proposing a 15 percent capital requirement for so-called megabanks as a way to reduce risk and remove the perception that they would get bailouts in a crisis. Midsize and regional banks would need to have 8 percent capital relative to assets and the bill is “silent” on capital for institutions below $50 billion in assets, Vitter said today at an Independent Community Bankers of America conference.
“It is our intent to have much more protection against a crisis and against a taxpayer bailout in a crisis, and it is our intent to level the playing field and take away a government policy subsidy, if you will, that exists in the market now favoring size,” Vitter said during a roundtable meeting at the National Press Club yesterday.
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http://www.bloomberg.com/news/2013-04-23/senate-too-big-to-fail-bill-boosts-big-banks-capital-standards.html
