Brown, Vitter and Levin Urge Regulators to Increase Capital Requirements

Press Release

Date: Nov. 22, 2013
Location: Washington, DC
Issues: Monetary Policy

Today, U.S. Sens. Sherrod Brown (D-OH), David Vitter (R-LA), and Carl Levin (D-MI) sent a letter urging the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) to strengthen their proposed supplementary leverage ratio in order to reduce future government support, eliminating the possibility of "too big to fail" policies in the future.

"We write to your agencies today to urge you to help prevent the next financial crisis, and ensuing bailouts, by strengthening your proposed enhanced supplementary leverage ratio for the largest financial institutions," the Senators wrote. "Your proposals make very positive steps in the right direction, but without further strengthening they will not provide adequate protection for taxpayers. We urge you, in the strongest terms possible, to consider a higher final leverage ratio. We feel this proposal along with your proposal on a capital surcharge for the largest banks must move forward thoughtfully and aggressively."

Despite receiving assistance from taxpayers in 2008, today, the nation's four largest banks--JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo--are nearly $2 trillion larger today than they were before the crisis. Their growth has been aided by an implicit guarantee--funded by taxpayers and awarded by virtue of their size--as the market knows that these institutions have been deemed "too big to fail."

Brown and Vitter recently released the findings of the first of two reports by the Governmental Accountability Office (GAO) on the federal government's bailout of large financial institutions during the 2007-2008 financial crisis. Senators Brown and Vitter have introduced the Terminating Bailouts for Taxpayer Fairness Act; legislation that would require the largest and most interconnected financial institutions to maintain a 15 percent capital ratio to ensure taxpayers will not serve as the backstop for risky investments.