Bill to Limit Too-Big-to-Fail Bank Risk Prepared in House

Photograph by Victor J. Blue/Bloomberg

A Bank of America Corp. branch in New York City.

Rep. John Campbell plans to offer legislation aimed at reducing the size of “too-big-to-fail” banks by requiring them to hold more capital including long-term debt.

Campbell’s bill comes as a number of lawmakers and regulators from both parties — including Federal Reserve Governor Daniel Tarullo — argue that the 2010 Dodd-Frank Act failed to curb the growth of large banks and express support for renewed efforts to limit the kind of systemic risk that fueled the 2008 financial crisis, Bloomberg News reports.

“Being big is not a problem in and of itself, but being big in a sense that it creates a competitive disadvantage and a systemic problem is a bad thing,” Campbell, a California Republican, said in an interview today with Bloomberg
Government. “If you want to stay big that’s fine, you can stay big. But it’s going to be rather expensive.”

Some critics of “too big to fail” banks have proposed breaking up the institutions. Campbell said that’s not a decision the government or regulators
should make.

“The reason I’m proposing this kind of thing and not a break-up is because how are you going to break them up?” Campbell said. “Are you going to break them up regionally, by business line, are you going to break them up into 10 different things or two different things? What are you going to do? I don’t that’s our decisions.”

Read the full story here.

What do you think about this article? Comment below!