A bill was introduced Tuesday in Congress to break up banks that are deemed too big to fail so that taxpayers would not have to face another government bailout of financial institutions, according to The Hill
The “Too Big to Fail, Too Big to Exist Act,” sponsored by Independent Sen. Bernie Sanders of Vermont and Democratic Rep. Brad Sherman of California would require the Treasury Department to identify any institutions — including banks, hedge funds, and other firms — whose failure could threaten the stability of the financial system, and then break them up.
“We have a situation now where Wall Street banks are not only too big to fail, they are too big to jail,” said Sanders.
Attorney General Eric Holder reportedly said recently that it would be difficult to bring criminal charges in cases involving huge firms because of the risk to the economy.
That's a concern as well among a bipartisan group of senators who sent a letter to federal regulators Tuesday asking them to speed up work on new rules that would shore up capital requirements for banks and ensure that shareholders and creditors, not taxpayers, bear the burden of any losses.
According to The Hill, the letter was signed by Democratic Sens. Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio along with Republican Sens. David Vitter of Louisiana, Bob Corker of Tennessee, and Susan Collins of Maine.
Brown and Vitter are also working on legislation. A draft version of the legislation, The Hill reported, would significantly beef up capital requirements, putting in place much bigger cushions against risk.
Federal officials are still in the process of implementing the 2010 Dodd-Frank law that overhauled the financial rules and regulations governing Wall Street. So the idea of having to deal with the prospect of more legislation aimed at reighing in how the nation's biggest financial institutions go about their business did not sit well with lobbyist who represent their interests.
“We believe that Dodd-Frank, once fully implemented, addresses the issue of ‘too big to fail,’” Scott Talbott, senior vice president for public policy at The Financial Services Roundtable, told The Hill.
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