WASHINGTON, D.C. — U.S. Sens. Sherrod Brown (D-OH) and David Vitter (R-LA), sponsors of the Terminating Bailouts for Taxpayer Fairness Act (TBTF Act), released the following statements in response to a study by the Federal Reserve Bank of New York confirming the advantages Wall Street megabanks receive over smaller banks, other large nonbank financial firms, and large nonfinancial companies by virtue of their “Too Big to Fail” status:
“Today, the New York Fed confirmed what regulators and experts of diverse ideologies have been saying: that Wall Street megabanks get advantages due to their ‘Too Big to Fail’ status,” Brown said. “To add insult to injury, American taxpayers are funding these advantages after many of their megabanks put our economy on the brink of collapse more than five years ago. It’s time to level the playing field for all financial institutions and prevent taxpayers from being on the hook for risky megabank practices.”
“Even the pro-megabank New York Federal Reserve has finally acknowledged what most research has already demonstrated – the megabanks receive much more favorable borrowing terms,” Vitter said. “Eliminating the megabanks’ federal handouts – and addressing the problem of ‘too big to fail’ financial institutions – is a simple matter of common sense, and we’ll continue fighting to protect the taxpayers from financial risks,” Vitter said.
The nation’s largest Wall Street banks enjoy 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.” This allows the nation’s largest megabanks to borrow at a lower rate than regional banks, community banks, and credit unions. This funding advantage, which has been confirmed by three independent studies in the last year, is estimated to be as high as $83 billion per year. Together, Brown and Vitter have successfully pressed the Government Accountability Office (GAO) to conduct a study of the economic benefits that the “too-big-to-fail” megabanks receive as a result of actual or perceived taxpayer funded support.
The Terminating Bailouts for Taxpayer Fairness Act (TBTF Act), would ensure that financial institutions have adequate capital to protect against losses. It is supported by the Independent Community Bankers of America (ICBA).