WASHINGTON, D.C. –Following last month’s massive losses at JP Morgan Chase –regarded as one of the best-managed banks – U.S. Sen. Sherrod Brown (D-OH), chair of the Committee’s Subcommittee on Financial Institutions and Consumer Protection, renewed his call for improved oversight to prevent taxpayers from subsidizing risky bets. At a Banking Committee hearing today entitled “A Breakdown in Risk Management” featuring testimony from James Dimon, Chairman of the Board, President, and Chief Executive Officer, JPMorgan Chase & Co., Brown urged ending “too big to fail” by imposing sensible size and leverage limits on Wall Street mega-banks.
“We’ve seen time and time again that trillion-dollar, Wall Street megabanks deemed ‘too big to fail’ are also too big to manage,” Brown said. “Risky Wall Street practices brought our economy to the brink once before and Ohio taxpayers should not be left cleaning up the next mess. Restoring faith in the financial system requires us to examine and acknowledge Wall Street and Washington’s mistakes and then impose proper oversight and accountability for Wall Street.”
Earlier this month, Brown sent a letter to Comptroller of the Currency Thomas J. Curry requesting information on the regulator’s supervision of JPMorgan Chase and their trading operations. In May, Brown introduced the Safe, Accountable, Fair & Efficient (SAFE) Banking Act of 2012, to hold Wall Street accountable, prevent future bailouts, and protect American homes, jobs, pensions, and businesses. On May 9th, Brown chaired a Banking Subcommittee on Financial Institutions and Consumer Protection hearing entitled, “Is Simpler Better? Limiting Federal Support for Financial Institutions.”
The SAFE Banking Act of 2012 would:
- Impose a strict 10 percent cap on any bank’s share of the total amount of deposits of all insured banks in the U.S. This would eliminate loopholes in the existing statutory cap.
- Impose a strict 10 percent cap on the liabilities that any one financial company can take on, relative to the U.S. financial sector. Like the deposit concentration limit, this would close loopholes in existing law.
- Impose a limit on the non-deposit liabilities (including off-balance-sheet (OBS) exposure) of a bank holding company of 2 percent of GDP. No bank holding company could exceed $1.3 trillion.
- Impose a limit on the non-deposit liabilities (including OBS exposure) of any non-bank financial institution of 3 percent of GDP. No non-bank financial company could grow larger than $436 billion.
- Codify a 10 percent leverage limit (including OBS exposure) for large bank holding companies and selected nonbank financial institutions into law.