April 22 (Bloomberg) -- U.S. lawmakers considered and some backed an idea by Federal Deposit Insurance Corp. Chairman Sheila Bair to limit the size of banks and prevent lenders from becoming “too big to fail,” U.S. House Democrats said.
Representative Brad Sherman of California and member of the House Financial Service Committee, said Bair “threw out” as a possibility regulating the growth of companies to prevent any from becoming so big that government is forced to take over the institution. Bair didn’t elaborate on her proposal, he said.
“Maybe there should be limits on the size of institutions,” Sherman said Bair suggested during a meeting yesterday with House Democrats. “There was a positive response from people in attendance.”
Bair has said she wants to “end too-big-to-fail” models that have shaped U.S. policy and wants financial firms to reduce systemic risk by “limiting size” and “complexity.” She said in March that regulators need to impose “higher capital requirements” to ensure banks have enough capital to withstand worsening economic scenarios.
Bair didn’t offer a proposal, suggest how to limit the size or specify the ideal size, said Representative Edolphus Towns, a New York Democrat. “That was the interest, to make certain that we don’t have this problem again, that these institutions get too big to fail, in the interest of consumers.”
Democrats invited Bair to a closed-door Washington meeting for a briefing on the banking industry and discuss a request to expand the FDIC’s borrowing authority from the U.S. Treasury to $100 billion from $30 billion. Bair has said an increase will help instill confidence in depositors that the government stands behind their FDIC-insured accounts after more than two dozen lenders were shut this year, lawmakers said after the meeting.
Depositors Protected
“Her message is the FDIC, even in the midst of everything that’s happened with 25 banks having been closed, not a single depositor has lost money,” said Representative John Larson, a Connecticut Democrat.
Bair said that expanding the FDIC’s borrowing authority would lessen pressure to raise the premiums on banks, especially on smaller institutions, to replenish the deposit insurance fund, said Representative Maxine Waters, a California Democrat and chairman of the Financial Services’ housing panel.
Lawmakers are concerned that “good banks would be penalized” for mistakes by larger banks that became overleveraged and took on too much risk, Waters said after the meeting.
Representative David Wu, an Oregon Democrat, said Bair told the group that “assessments should reflect costs” to insure.
Bair also endorsed an effort, pushed by House Speaker Nancy Pelosi and discussed by Democratic legislators at the meeting, for a comprehensive inquiry into the causes of the financial crisis, Larson said.
“She’s in the same camp as a number of people, that we need to take a thorough look back at what transpired,” Larson said in an interview. “We need to take a look back at how we got into this current fix.”
1 comment:
It is not the size, but the rules, and control. The system is out of control
Post a Comment