This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Brown-Vitter Unveil 'Too Big to Fail' Bill

NEW YORK ( TheStreet) -- Sens. Sherrod Brown (D., Ohio) and David Vitter (R., La.) on Wednesday unveiled their plan to end "Too Big to Fail" bank pitfalls that helped create the 2008 global financial crisis.

Speaking to reporters from the U.S. Capitol, the senators announced a plan that would require the largest U.S. "megabanks" with total assets of over $500 billion to raise capital levels to at least 15% of total assets, with regional banks with assets ranging from $50 billion to $500 billion to have a minimum capital of 8% of total assets. The proposal is silent on banks with less than $50 billion in assets.

"The whole idea here is to restore market discipline. The Brown-Vitter bill does that, and that's what community banks have been operating under all along," said Brown. "The 15% was what we thought made the most sense looking at being stronger than Basel III or Basel II."

The Federal Reserve has proposed rules to implement Basel III that also focus on the quality of equity by excluding cumulative preferred shares and most trust preferred shares from Tier 1 capital. Those rules have not been finalized.

"The immediate effect of this bill will be to force American banks to shrink, reducing the lending they provide to the United States economy," Richard Bove, vice president of equity research at Rafferty Capital Markets, had written in a note earlier this month about the 15% capital requirement for the largest banks. "This will defeat the Federal Reserve's current monetary policies and create a recession of unlimited duration."

Basel III is the third version of an international banking agreement that looks to maintain a stable financial sector by implementing capital requirements banks must hold. Holding more capital, supporters have said, would soften the impact to banks and the economy in the event of another financial meltdown.

-- Written by Joe Deaux in New York.

>Contact by Email.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
C $53.07 0.00%
BAC $15.56 0.00%
JPM $62.84 0.00%
WFC $54.05 0.00%
AAPL $124.75 0.00%

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs