Senators push to end 'too big to fail'

Two senators from opposing parties think the largest Wall Street banks are still too big and need to be reined in.

Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.) introduced legislation this week to require that large banks hold more capital in reserve and limit their government safety net.

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The Terminating Bailouts for Taxpayer Fairness Act, introduced on Wednesday, would set increased capital standards for most banks, and even more stringent limits for the six U.S. banks with over $500 billion in assets: Wells Fargo, Citibank, Bank of America, JPMorgan Chase, Goldman Sachs and Morgan Stanley.

The legislation would also set up limits to a bank's ability to move money between affiliates and reduce the regulatory burden for small community and rural institutions.

"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," said a statement from Brown, the chairman of the Banking Committee's subcommittee on financial institutions and consumer protection.

"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," Brown said. "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 bill's capital requirements would replace and be more strict than the international Basel III standards, which have been a subject of skepticism on Capitol Hill. The bill would abandon the U.S.'s implementation of that standard, which sets a mark of 7 percent for top-tier capital.

Under Vitter and Brown's proposal, mid-size banks will have to hold 8 percent of their assets in reserve, and megabanks will have a 15 percent requirement. Regulators would also be able to increase capital ratios if banks get larger.

The senators first announced their intention to introduce a bill addressing the "too big to fail" banks in February.