{mosads}The bill would require the Treasury Department within 90 days to determine what financial institutions meet the “too big to fail” label and enjoy implicit government support. Among those banks that must be included on the list are Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, and Wells Fargo.
Then, the government would have one year to break up those institutions so that “their failure would no longer cause a catastrophic effect on the United States or global economy without a taxpayer bailout.” The bill does not detail exactly how the banks should be broken up.
The legislation marks the latest attempt by lawmakers to tackle the “too big to fail” issue, which has lingered on a topic of discussion years after the financial crisis and passage of Dodd-Frank. Lawmakers on both sides of the aisle, as well as some regulators, have pointed out that massive banks still enjoy a discount when it comes to raising funds, an indication that financial markets believe those institutions enjoy implicit government backing that would become realized if the institutions faced collapse.
While the White House and the financial industry have been adamant that bank bailouts are a thing of the past thanks to Dodd-Frank, lawmakers and policymakers from both parties are continuing to air concerns about the nation’s biggest and most influential financial institutions.
Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.) are currently working on another big bank bill, which would significantly strengthen capital requirements for banks, forcing them to hold significantly more capital as a cushion against potential losses.
Sanders said that he was supportive of Brown’s bill, but Sherman added that he believed simply increasing capital requirements would not do enough to put the issue to bed.
“The amount of capital that would be necessary to eliminate this implicit federal guarantee … would be well beyond anything that’s being discussed,” he said.
Sanders cited that legislation, as well as a growing number of conservative voices, including right-leaning members of the Federal Reserve, who have aired similar concerns about “too big to fail banks,” as proof that issue is gaining traction.
“We have more momentum than we had in the past,” he said. “It’s not going to happen immediately, but I think momentum is with us.”