Subscribe to Common Dreams News Updates
Most Popular This Week
Popular content
Today's Top News
Senators Introduce 'Too Big To Fail' Amendment
Brown, Kaufman Introduce The Safe Banking Act Of 2010
In a conference call with reporters, Sens. Sherrod Brown (D-OH) and Ted Kaufman (D-DE) introduced a bill, The Safe Banking Act of 2010, which would mandate hard leverage and size caps on financial institutions and force the breakup of many of the largest mega-banks. The duo planned to introduce their legislation as an amendment to the financial reform bill expected next week.
Sens. Sherrod Brown (D-OH) (pictured) and Ted Kaufman (D-DE) introduced a bill, The Safe Banking Act of 2010, which would mandate hard leverage and size caps on financial institutions and force the breakup of many of the largest mega-banks. The bill would place a cap on any financial institution, limiting
their total assets to 3% of GDP (that would lower to 2% for banks, as
opposed to 3% for non-bank institutions). Currently, the 6 largest
banks have holdings that equal 63% of GDP. The Safe Banking Act would
also impose a 10% cap on any bank holding company’s share of insured
deposits. Bank holding companies and “selected nonbank financial
institutions” would have a leverage limit of 6%, meaning that they
would not be able to lend out more than around sixteen dollars for
every dollar of capital in house.
In his opening statement, Brown said “If we’re going to prevent big banks from putting our entire economy at risk, we need to place sensible size limits on our nation’s behemoth banks. We need to ensure that if banks gamble, they have the resources to cover their losses.” Sen. Kaufman, who has been a hero on this issue for his strong stands against too big to fail, added that “this is exactly what we need,” because financial institutions don’t need this kind of size to compete internationally, and they just put the nation’s financial system needlessly at risk. He explained that we cannot leave the question of size and leverage caps to the regulators, because they already have the authority under existing statutes to institute these size and leverage caps, and they haven’t done it.
While this legislation has been introduced as a standalone bill, Brown said that they would introduce in during the financial reform debate as either one or two amendments (presumably splitting the size and leverage caps). Sen. Kaufman described some other amendments, including a reinstitution of the Glass-Steagall Act with Maria Cantwell and John McCain, and a ban on proprietary trading a la the Volcker rule with Carl Levin and Jeff Merkley. However, he said, this bill was “the number one priority.”
So far, the bill has three other co-sponsors: Bob Casey, Sheldon Whitehouse and Jeff Merkley. Citing Alan Greenspan’s statement that too big to fail is too big, and the bipartisan support for the concept of breaking up the megabanks from Federal Reserve regional bank heads and other experts, Brown challenged Republicans to join them on this amendment. If they’re so concerned about ending too big to fail, the GOP should want to include this legislation, he said.
Brown predicted that the bill would help boost lending to small businesses by increasing competition. He added that “banks with one trillion dollars in liabilities are inherently risky… The SAFE Banking Act prevents megabanks from controlling too much of our nation’s wealth – no one investment bank or financial institution should be able to risk more than three percent of our nation’s gross domestic product and they should have enough money to back up their liabilities.”
Kaufman stressed that whatever legislation is written to deal with the financial crisis of 2008 must be useful for the long haul. We can limit size and leverage now or later, he cautioned, saying that this policy must last 50 years down the road, the way legislation did after the stock market crash of 1929. “Limiting size and leverage are redundant fail-safe provisions to prevent a dangerous outcome. Senator Brown and I are proposing a complementary idea, not a substitute,” Kaufman said in a statement.
Brown and Kaufman were joined on the call by David Borris of the Main Street Alliance, a coalition of small businesses who support Wall Street reform. They sent a letter to Harry Reid today expressing support for the Safe Banking Act.
This bill is where the action is in Wall Street reform. Whether or not it will truly end too big to fail can be seen in whether or not this gets added to the overall package.
30 Comments so far
Show AllWe shall see what the sausage grinder makes of this
Other than the Cantwell/McCain Glass Steagall bill, this is the first real reform proposal to be introduced as part of the Wall Street "reform" package moving forward.
Contact your two US Senators and demand that they so-sponsor this bill, or at least they admonish Obama not to derail it the way he derailed single payer medical insurance and the public option.
I hope this doesn't end up in the same disaster as health care "reform" did but to play it safe, I'm not taking chances. I am sticking to my small local bank that isn't one of those dishonest "too big to fail" shenanigans.
This bill is critical because it will not only affect the banksters, it will set a precedent for other industries (insurance, drugs, airlines, etc.) that are rapidly consolidating so they can also be too big to fail and get taxpayer-funded bailouts.
Contact your two Senators NOW.
I would take this kind of legislation seriously but after having to reconsider the fact that the politicians could have easily allowed the banks to suffer the consequences for their own actions instead of bailing them out, I just don't know if this bill will really have an effect. I guess I had better read the bill before they make it too big. My fear is they'll produce loopholes big enough for corporate private jets to fly right through and along with it invent more excuses to limit the benefits for consumers or remove them altogether like they did on the public option on health care. I will have to think about this.
Good move, I wonder how long before Obama caves on this issue though..
Oh wow, closed that barn door.
Just in the nick of time too. Otherwise tens of trillions in bailouts and selling USD short and war appropriations might have got out.
Geezus H. Christ--if these clowns had not acted now the US might be bankrupt already! With millions upon millions unemployed and losing their homes!
Geezus H., if these guys had not acted now--the for profit insurers might have taken over public Health Insurance by now and added even more money to the $700 BILLION a year they spend on advertising and executive salaries.
Boy THAT was a close call.
Goddamned clowns.
It looks like I will have to give Bob Casey credit for something. It hurts to do it but I must admit that even an otherwise tool of corporate interest, Bob Casey must see these big banks as morally evil institutions without redeeming qualities. Good for you Bob, at least you have shown that you have a limit as to how much thieving and corruption you can stomach. See if you can use any of that moral sentiment to get some other Senators to stand with you. Remember that most of us citizens tend to see you Senators the way you see Big Bankers. If you want to raise your status to morally tolerable the least you Senators can do is break up these banks.
"“If we’re going to prevent big banks from putting our entire economy at risk, we need to place sensible size limits on our nation’s behemoth banks. We need to ensure that if banks gamble, they have the resources to cover their losses.”
Brown
Er, ah, this is like Reagan saying the US will NEVER be the first to use nuclear weapons.
Er, they already did.
They gambled big, they lost, they destroyed the economy and USD AND THEN, AND THEN they borrowed your government money to pay for it, including their own obscenely high bonuses, parachutes, and salaries.
And they own even more real assets than they did before through foreclosures and bankruptcies.
Good going, Senator--just in the nick of time. YASSUH.
Sorry folks, "better too late than never" doesn't wash.
Is this another bone dangled in front of progressives to get their support---that will be taken away before the final bill is passed? Just like the "public option"....
I'll wait to see what the final bill looks like.
"To big to fail?" Sounds like the title to a porno flick. Well, it certainly feels like one, with the gigantic shaft that wall street and the govt. have inserted into the publics private domain.
Well put!
It IS a porno flick, starring Uncle Sam-- with Special Guest Star: We the People as "Ben Dover".
watching the cartoon, waiting for the movie...
mouths open and close, faces and hands express, words are heard, moments pass...
meanwhile, chemicals flow and drones get built...
What's that tap-tap-tapping noise? Hear it?
I can't help wondering what hole the banks would find to slip through in this "too good to be true" bill? Surely there's one somewhere? One thing I've learned, the larger the bill, the more loopholes buried in it. It seems to me ahat amendments aren't a secure way to go. Immediately I start thinking about conflicting language, or amendments being stripped by committee chairmen or even (gasp) Majority Leaders and Speakers - been known to happen. But gee, a handful of intrepid and lionhearted
Senators come out looking good.
I remember reading decades ago about some innocuous language in a tax bill and no one reading it could discover what AT&T knew, that it provided a huge tax break just for AT&T! That was before the breakup of Ma Bell.
When the people fear their government there is tyranny,
when the government fears the people there is liberty.
~ Thomas Jefferson
Gee, what do you think law and business schools are for?
“If we’re going to prevent big banks from putting our entire economy at risk, we need to place sensible size limits on our nation’s behemoth banks. We need to ensure that if banks gamble, they have the resources to cover their losses.”
I would think that the most effective way to do the above is to dump the Federal Reserve and place its functions with the US Treasury.
No more 6 % tax to print our money. No more secret dealings by the FED.
And substantially more control given to Congress, where it belongs. I don't believe size is the problem as much as transparent control of the banking system.
It'll be judged unconstitutional, the same way that limits on utility-company profits were.
The state PUCs argued that the utility companies already had a captive customer base, so they shouldn't be allowed to gouge their victims.
SCOTUS: Nope, can't be having with any limits on corporate profits.
Which is where our phony "choice" of utility providers came from.
If they do to this bill what they did to health care reform, the corporate profits might stay intact and SCOTUS might go silent. Given the Democrats' tendency to water down a legislation and finally make it regressive, my guess is it'll pass and SCOTUS won't be bothered.
Gee, sounds very reasonable to me. Which is why it most likely will not pass or not be included in any kind of reform bill for financial matters.
"We need to ensure that if banks gamble, they have the resources to cover their losses”
The reform proposed by Brown/Kaufman is designed to be just enough to stifle demands for a truly populist reform.
The proposed leverage requirement of 6% real assets backing the fabrication of funny munny, is nowhere near enough. Banks have absolutely no legitimate reason to leverage at all. Leveraged gambling accomplishes NOTHING for the society.
Instead, leveraged gambling severely damages the society as the recent fiasco demonstrates. The leveraging creates not only fake munny, but more destructively, creates fake influence in Washing-town.
A truly populist reform bans leveraged gambling. A ban also happens to resonate with the claims of "family values" chirped on the religious right, with claimed support of well over 60% of the population.
If USans want to actually walk the walk they like to talk, they will demand a total ban on leveraged gambling. But they are highly unlikely to do so. Why? Mass addiction to petro-opiates is the mechanism that causes USans to ignore the crimes of the elites.
"Populist", eh?
Finance Capitalism is a Meta-Economic phenomenon.
Lenin did not analyse it that way but it comes to the same thing in different dress.
It is also the inevitable, final and Imperialist stage of Capitalism.
There is no return to status quo ante.
Reform is not possible.
Patchworks are every one them coopted and just make matters worse.
Gee senators, how about stop bailing them the f**k out. The nonprofitable parts would have been discarded faster then you can say TARP.
But noooo, they were too big to fail. Really, the contributions and kickbaks you received were too big to be disclosed more likely.
If this were real reform, there wouldn't be anyone in the Senate proposing it.
Yes, that's a classic ad hominem. But yes, it's also true.
More than an ad hominem but a very subtle ad hominem too.
It won't even make a vote as a stand alone...
As an add on amendment, it will be filibustered,
then some Democrat Senators won't vote to end the
filibuster and the amendment will be dropped,
in this way, the Democrats will be able to blame
the repubs for this legislation not having the light
of day..
It certainly is a porno flick.
Most likely heading for the same fate as the public option.
Hopefully I am wrong tho.
Folks, how 'bout we at least be open minded about this? If it goes nowhere, we'll consider it a publicity stunt just like so many others we've seen. But Mitch McConnell has said he wants to end bailouts and Judd Gregg says Republicans want to end TBTF. Robert Reich recently wrote, "The only way to ensure no bank is too big to fail is to make sure no bank is too big, period." And Simon Johnson says the 6 largest banks must be broken up or we're doomed to repeat 2008-09.
Yes, yes. The barn door was open and half the horses have run out. That's no reason to let the rest escape as well. We'll see whether this is a serious effort or not. Congress really wants to preserve their jobs and they know people are pissed. I predict Obama will find a way to twist the arms of enough Senators to defeat this, or possibly even veto it. But you never know. We may actually see some folks do the will of the people for a change.
There's clearly a lot more to be done like salary caps for CEOs, but it's worth preventing another raid on the Treasury if it can be done yet.
William Rood, patriotic citizen of the world
I like the idea that Senate members are looking for ways to bring the economy back from the "edge of the cliff" without playing the "blame game." Bringing back the Glass-Steagall Act is an excellent idea with some added up to date safeguards is even better. I bet the lobbyist are staying busy these days. Thank you Senator's Brown and Kaufman.
Congress' 'progressives' only introduce progressive legislation when there is no possible way it will pass. This is done to shore up their voting constituents, as progressives, like right-wing Republicans, have a higher voting frequency than average Americans. When the legislation goes nowhere, it leaves the 'progressives' with a record of 'trying hard'. There is not one 'progressive' in Congress (as we've recently seen) who will endanger his or her job by fighting to the end for progressive legislation using all the means at their disposal. The Progressive (sic) Caucuses are a fraud. Disprove me if I'm wrong.