EMAIL DETAILS

With a Sen. K mention
An end to ‘too big to fail’ By Sherrod Brown, Published: June 6

Two years ago — after the worst financial crisis in more than a
half-century — one-third of the Senate proclaimed that “too big to fail” is
simply too big.

A bipartisan group of 33
senators<http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=111&session=2&vote=00136>supported
a proposal called the SAFE
Banking Act <http://thomas.loc.gov/cgi-bin/bdquery/z?d111:SP3733:>, which I
introduced with my former colleague, Ted
Kaufman<http://www.washingtonpost.com/wp-dyn/content/article/2010/10/27/AR2010102705228.html>(D-Del.).
This act would eliminate the taxpayer support enjoyed by the
largest Wall Street banks — institutions that, by virtue of their size,
could topple the entire U.S economy, should they fail.

Our amendment did not pass the Senate, but to judge from the numerous
recent calls to limit the size and risk of Wall Street banks — calls that
are coming not only from public squares but from boardrooms too — it’s
clear that this commonsense idea is starting to take hold.

A few weeks ago, our nation’s largest bank revealed that it had lost $2
billion<http://www.washingtonpost.com/business/economy/jpmorgan-chase-faces-class-action-lawsuit-over-2b-trading-losses/2012/05/16/gIQA14OmTU_story.html>in
a mere six weeks on trades that were supposedly intended to lessen its
risk profile. Even at the best-managed firms, there are dangerous
consequences of large, complex institutions undertaking large, complex
activities. These companies are simply too big to manage, and they’re still
too big to fail.

While the Dodd-Frank Wall Street Reform
Act<http://banking.senate.gov/public/_files/TheRestoringAmericanFinancialStabilityActof2010AYO10732_xml0.pdf>made
some important changes, the government might once again be tempted to
bail out a megabank in trouble.

When the Treasury Department decided which banks to rescue and which to let
falter in the fall of 2008, it set the precedent that certain institutions
are “too big to fail.” This status comes with an implicit guarantee from
the federal government: As a result, ratings agencies give these megabanks
a boost, and bondholders charge the banks less to borrow because they know
that the government won’t let the institutions go under. Right now, about
20 of the nation’s largest banks can borrow money at a lower rate — ranging
from 50 <http://www.imf.org/external/np/g20/pdf/062710b.pdf> to 80 basis
points <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1961656> by some
estimates — than community banks can, thanks to this government guarantee.

Should the U.S. government give Wall Street banks an advantage over Ohio’s
First National Bank of Sycamore? Supporters of truly free markets would say
“no.” And yet our nation’s policies favor the trillion-dollar banks,
fueling their risky activities.

This isn’t free-market economics. And it isn’t fair.

Government support also encourages megabanks to take more risks, by raising
less equity and relying more on debt, than their community-bank
competition. Research by Thomas
Hoenig<http://www.kc.frb.org/speechbio/hoenigpdf/hoenigKBA.08.06.09.pdf>,
a member of the Federal Deposit Insurance Corp.’s board of directors, shows
that such banks need either to raise $300 billion in capital or to shrink
their balance sheets by $5 trillion to meet the same standards that the
market requires of community banks.

This is not how capitalism is supposed to work. It’s Wall Street welfare.
And absent decisive action, U.S. taxpayers will continue to subsidize the
largest banks.

That’s why I’ve reintroduced the SAFE Banking
Act<http://www.opencongress.org/bill/111-s3241/show>,
which would end “too big to fail” once and for all by placing sensible size
limits on our nation’s megabanks and ensuring that if they gamble, they
have the resources to cover their losses. It would prevent any one bank
from controlling more than 10 percent of federally insured deposits or
assuming more than 10 percent of the U.S. financial sector’s liability.
Under the bill, no bank could grow to more than 2 percent of the nation’s
gross domestic product – with these limits reevaluated as the economy
grows. Moreover, banks could not borrow more than $10 for every $1 of
shareholder equity. These size limits would only affect the six largest
Wall Street banks, who would have three years to downsize by selling assets
or spinning off certain lines of business, as they see fit.

Megabanks should fund themselves the same way that community banks do: by
attracting more capital and taking on less debt. Wall Street banks should
use investors’ money — not U.S. taxpayers’ money — to make their bets.

It’s time for those who profess the virtues of the “free market” to put
their equity where their mouth is. That means an end to the government
guarantees that create a “heads I win, tails you lose” Wall Street culture.
It means an end to picking winners and losers and an end to corporate
welfare that gives trillion-dollar banks unfair advantages over regional
and community banks. And it means preventing U.S. taxpayers from ever again
being put in the position of having to bail out Wall Street.


---------- Forwarded message ----------
From: Google Alerts <googlealerts-noreply@google.com>
Date: Thu, Jun 7, 2012 at 1:28 PM
Subject: Google Alert - "ted kaufman"
To: smacklera@gmail.com


***News*** *2* new results for *"ted kaufman"* An end to 'too big to
fail'<http://www.google.com/url?sa=X&q=http://www.washingtonpost.com/opinions/an-end-to-too-big-to-fail/2012/06/06/gJQAi7lbJV_story.html&ct=ga&cad=CAcQAhgAIAAoATAAOABAu8nD_gRIAVgBYgVlbi1VUw&cd=vY6qRFAlTYU&usg=AFQjCNFiQRBWqQsKu5Gtqvpg9Vl_RJRpRA>
Washington Post
A bipartisan group of 33 senators supported a proposal called the SAFE
Banking Act, which I introduced with my former colleague, *Ted Kaufman*(D-Del.).
University of Delaware receives Biden senatorial
papers<http://www.google.com/url?sa=X&q=http://www.newsworks.org/index.php/component/flexicontent/item/39589-university-of-delaware-receives-biden-senatorial-papers&ct=ga&cad=CAcQAhgAIAAoATABOAFAu8nD_gRIAVgBYgVlbi1VUw&cd=vY6qRFAlTYU&usg=AFQjCNHfCBbnpZP7bBo8d7YH9t2Yjl1uGA>
Newsworks.org
The library also holds the collections of former Congressman and Governor
Mike Castle and former Senator *Ted Kaufman*, among many others.

------------------------------
Tip: Use site restrict in your query to search within a site (site:
nytimes.com or site:.edu). Learn
more<http://www.google.com/support/websearch/bin/answer.py?answer=136861&hl=en&source=alertsmail&cd=vY6qRFAlTYU&cad=CAcQAhgAQLvJw_4ESAE>
.

Delete<http://www.google.com/alerts/remove?hl=en&gl=us&source=alertsmail&s=AB2Xq4i1Z46mL5c7JQUCakQv61WoTLnlC5LFiOE&cd=vY6qRFAlTYU&cad=CAcQAhgAQLvJw_4ESAE>this
alert.
Create<http://www.google.com/alerts?hl=en&gl=us&source=alertsmail&cd=vY6qRFAlTYU&cad=CAcQAhgAQLvJw_4ESAE>another
alert.
Manage<http://www.google.com/alerts/manage?hl=en&gl=us&source=alertsmail&cd=vY6qRFAlTYU&cad=CAcQAhgAQLvJw_4ESAE>your
alerts.


--

Alexander Snyder-Mackler
(302) 598-867