The broad indexes ended mixed, after the U.S. Census Bureau reported that durable goods orders declined 5.7% in March after rising 4.3% in February. Orders excluding transportation were down 1.4%. The average estimate among economists polled by Thomson Reuters was for durable goods orders to fall by 2.8% in March, with core durable goods orders rising 0.5%.
The KBW Bank Index (I:BKX) rose over 1% to close at 56.44, with all but two of the index components ending the session with gains.
The Bombshell Brown/Vitter Bill
Senators Sherrod Brown (D., Ohio) and David Vitter (R., La.) on Wednesday proposed the Terminating Bailouts for Taxpayer Fairness Act, which require "megabanks" with total assets of over $500 billion to raise capital levels to at least 15% of total assets. Under the proposal, "mid-sized and regional banks would be required to hold eight percent in capital to cover their assets."The senators said in a press release that "Five years ago, risky practices at Wall Street banks puts our economy on the brink of collapse - and jeopardized the savings and pensions of millions of Americans. Today, the nation's four largest banks are nearly $2 trillion larger than they were then - aided by an implicit government guarantee awarded by virtue of their 'too big to fail' status." "Our bill will ensure a level playing field for all financial institutions by ending the subsidy for Wall Street megabanks and requiring banks to have adequate capital to back up their liabilities," the senators said. The TBTF bill's capital requirements would be much higher than the Basel III capital requirements for the largest banks, which will be fully phased in by January 2019, under the Federal Reserve's proposed rules. The Fed's proposed rules require large banks to have Tier 1 common equity ratios of 7%, plus additional requirements for "systemically important financial institutions," or SIFIs. Based on determinations by the Basel Committee, the additional capital surcharges for Citigroup (C) and JPMorgan Chase (JPM) are 2.5%, so each of these banks has a fully phased-in minimum Basel III Tier 1 common equity ratio requirement of 9.5%.
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