Too big to fail (TBTF), and the need to end it once and for all received an additional boost from two Federal regulatory opinion leaders last week. Federal reserve Chairman Ben Bernanke and OCC Comptroller Tom Curry, while not formally endorsing the Brown-Vitter concept, came out swinging last week calling for the need for higher capital requirements for the nation's largest banks. The Brown-Vitter bill, S. 798, would mandate capital levels of 8% or greater for banks $50 billion and greater and 15% for banks with assets exceeding $500 billion. The legislation also eliminates Basel III requirements on community banks, which IBAT has advocated.
In Sunday's Washington Post, columnist Barry Ritholtz opines why the Brown-Vitter legislation has gone farther than any other legislative attempts to end too big to fail. "Simplicity. The most common message heard during the debate over Dodd-Frank was its complexity. The beauty of the TBTF act is its simplicity - hard numbers for capital reserves." Ritholtz also observes that the bill has broad ideological support among a broad cross-section of parties whose interests align with this legislation. A copy of the full Washington Post story can be found here.
ICBA has come out strongly in favor of Brown-Vitter. ICBA President Cam Fine observed "it's time to put the word 'free' back in 'free market.' Let's get the taxpayer subsidy out and level the playing field among TBTF banks and community banks."
The IBAT Board will consider endorsement of the bill in a special called telephone board meeting later today. IBAT President and CEO Chris Williston was recently quoted in several industry trade publications as saying, "the too big to fail debate is critical in our quest to obtain comprehensive regulatory relief for community banks. It highlights the disparity of bank business models and why we should not be subjected to the same regulatory overkill as the systemically important banks."