Sens. Sherrod Brown, D-Ohio, and David Vitter, R-La., in introducing legislation to end “too big to fail” banks and taxpayer bailouts, accomplished a few positive things even though their bill in its current form has virtually no chance of enactment.
On the positive side, the senators broke ranks with Washington’s official and patently false claim that the Dodd-Frank Act ended “too big to fail” and taxpayer bailouts. Second, a liberal Democrat teamed with a conservative Republican in a welcome display of bipartisanship seldom seen in Washington these days.
The core of Brown-Vitter is a requirement that banks larger than $500 billion maintain 15% equity capital to total assets – multiples higher than has been required of these banks in modern times and nearly double smaller bank requirements. I’m a “hawk” on bank capital and regulation, so I’m with Brown-Vitter in my heart, but my experience tells me that what they are proposing will do far more harm than good.