Dems looking to slim down big banks

Democrats in both chambers are ramping up pressure on "too big to fail" financial institutions, introducing bills that would limit just how big a bank could get.

On Thursday, Reps. Brad Miller (N.C.) and Keith Ellison (Minn.) introduced legislation that would set a series of caps on the size and reach of the nation's "megabanks." Noting that the nation's 10 largest banks hold assets exceeding 61 percent of the nation's economy, they argued that despite the financial crisis and the Wall Street reform law, the nation's banking titans still pose a threat to the nation's financial system and economy.

“The gigantic size of megabanks, and the perception in the marketplace that they are too big for the government ever to permit to fail, gives them an unfair competitive advantage over smaller financial institutions that distorts the market and discourages competition.” said Miller. “The lack of competition in the banking industry, in turn, leads to ever-higher levels of risk in the system.”

The measure mirrors a bill Miller introduced in 2010, and is a companion measure to one unveiled Wednesday by Sen. Sherrod Brown. The Ohio senator argued that not only would his bill protect the financial system, but also help community banks compete, which in turn could boost small business lending.

Under the proposals, a single bank could not hold more than 10 percent of the nation's banking deposits, nor take on more than 10 percent of the banking system's liabilities. Banks could take on no more than $1.3 trillion, or 2 percent of the nation's gross domestic product, in non-deposit liabilities. Non-banks could not take on more than three percent of GDP in liabilities, and could not grow larger than $436 billion.

Four existing banks — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — are currently above the size cap, and would need to be shrunk down if the bill became law, according to Miller's office.

The issue of "too big to fail" banks has been a rare topic that has attracted attention from both parties. Republicans maintain the Dodd-Frank financial reform law fails to address the problem of institutions so hefty their failure would threaten the entire financial system. And Democrats are calling for the nation's biggest banks to be broken up, and are ramping up pressure on the GOP to get on board.

Furthermore, some current and former regulators have also suggested breaking up the biggest banks, including the former head of the Federal Deposit Insurance Corporation, Sheila Bair, and Richard Fisher, the president of the Federal Reserve Bank of Dallas.

In addition to introducing the bill, Miller sent a letter to House Financial Services Committee Chairman Spencer Bachus (R-Ala.) asking him to join the cause.

"Please consider this legislation in any future hearing on 'Too Big to Fail' financial institutions," Miller wrote. "Also, I would like the chance to include you on the list of the bill's cosponsors."

A spokesman for Bachus did not respond immediately to a request for comment.

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