Updated from 6:45 a.m. ET with comment from ConnectOne Bancorp CEO Frank Sorrentino III.
NEW YORK ( TheStreet) -- Senators Sherrod Brown (D., Ohio) and David Vitter (R., La.) may see individual political benefits from their proposed capital rules for U.S. banks, but their bill repeats many elements already included in previous legislation, while taking an infantile stance against the risk-weighting of banks' assets.
The senators on Wednesday proposed the Terminating Bailouts for Taxpayer Fairness Act, which would 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."
In keeping with the hip Washington trend of bashing big banks, the senators took a populist tone in their three-page summary of the TBTF bill, saying the proposed capital rules would "ensure that megabanks gamble with their own funds -- not taxpayer dollars."When referring to banks' activities as "gambling," the senators ignore banks' obvious role in providing businesses with the credit they need to expand, which means economic recovery, expansion and job creation, which every senator would certainly claim to support.
While nearly everyone knows the U.S. government bailed out the largest U.S. banks through the Troubled Assets Relief Program, the senators conveniently left out the fact that most of the funds extended to banks though the Troubled Assets Relief Program, or TARP, have been repaid, with plenty of interest, that TARP has been profitable. The senators said in their press releases 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.