Regulation

Fed rules would end ‘too big to fail,’ lawmakers say

The Federal Reserve is proposing higher capital requirements for the nation’s eight largest banks to protect taxpayers from bailing out financial institutions that are “too big to fail.”

Under the latest implementation of the Dodd-Frank financial reforms, the new risk-based capital surcharges would apply to systemically-important U.S. banks that hold more than $50 billion in consolidated assets. 

That list includes JPMorgan, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, and State Street.

In the wake of the recent Wall Street financial crisis, lawmakers are hailing the new rules as a win for taxpayers.

“It’s encouraging that the U.S. is now leading — rather than following — when it comes to protecting the safety and soundness of our financial system,” Sen. Sherrod Brown (D-Ohio) said in a statement. “This is an important step in the right direction, but we must do more to ensure that banks have adequate capital to cover their losses.”

Brown and Sen. David Vitter (R-La.) are pushing legislation that would raise the capital standards for banks to prevent against further taxpayer-funded bailouts.

“Even the pro-megabank Federal Reserve has finally acknowledged that the status quo is only allowing the problem of ‘too big to fail’ to continue,” Vitter said.

“The Fed’s move today is a simple matter of common sense, and we’ll continue fighting to build on this and protect the taxpayers from financial risks. We still have a long way to go.”

The proposed risk-based capital surcharges would be phased in from January 2016 through January 2019.

“The proposed rule is an important part of the board’s efforts to establish enhanced prudential standards for the most systemic U.S. banking firms and improve the resiliency of these firms,” Fed chairwoman Janet Yellen said Tuesday.

Tags David Vitter Sherrod Brown
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