WASHINGTON (4/25/13)--Big banks are getting it from all sides in recent days, as Capitol Hill lawmakers and community banks both call attention to the need to end the nation's vulnerability to "too big to fail"--or TBTF--banks.
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Community banks have turned the heat on their "bigger brothers" in an ad in publications targeting a Capitol Hill readership. "STOP TBTF NOW," urges one add illustrated by two maps of the United States--one showing the devastating effects of allowing a "too big to fail banking market" to wipe out a "free banking market."
And from Senate lawmakers Wednesday came the introduction of legislation that would impose stronger capital requirements on banks. That bill, known as the Terminating Bailouts for Taxpayer Fairness Act (S. 798), would require banks with more than $500 billion in assets to maintain a capital ratio of at least 15%. (See related story: Senate 'Too Big To Fail' Bill Released.)
"Requiring the largest banks to finance themselves with more equity and with less debt will provide them with a simple choice: they can either ensure they can weather the next crisis without a bailout, or they can become smaller...adequate capital levels lower the likelihood that an institution will fail and lower the costs to the rest of the financial system and the economy if one does," Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.), the TBTF bill's sponsors, said in a Wednesday joint New York Times op-ed.