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Will Congress end bank bailouts?

By David McMillin · Bankrate.com
Wednesday, February 13, 2013
Posted: 7 am ET

The debate over too-big-to-fail banks continues this week on Capitol Hill.

U.S. Rep. John Campbell, R-Calif., is introducing a bill titled the Systemic Risk Mitigation Act. If approved, the bill would require the biggest members of the banking industry to raise an additional layer of capital. In the event that an institution began teetering on the brink of failure, that capital would provide an extra cushion to prevent any type of bailout funded by taxpayers.

"The 'too big to fail' problem has not been fixed and remains a serious threat to our future prosperity," Campbell said in a statement. "We don't want to be like Europe."

While the bill is designed to eliminate the possibility of a public backstop for privately held banks, the release from Campbell's office makes it clear that he is not advocating for an actual breakup of too-big-to-fail institutions. His approach seems to strike quite the political balance between pleasing the public and giving members of the private sector the ability to make their own decisions.

"This legislation gives financial institutions, not policymakers, the final decision on how they will structure themselves," the release states.

In an interview with Bloomberg News, Campbell reinforced that his proposal does not hold all bad news for big banks, indicating that he believes higher capital requirements should excuse banks from the proposed ban on proprietary trading of the Volcker rule.

If you're a regular reader, you know that Congress has been working to address the banking industry's size issues. However, lawmakers haven't exactly knocked it out of the park in terms of developing an effective plan for the future of big banks. Five years removed from the financial crisis, questions remain over whether the government continues to fuel the perception that some banks are simply too important to our economy to ever let them fail.

What do you think Congress should do about the biggest banks in the country? Do you believe they are still a threat to the health of our economy?

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13 Comments
Ed of Ct.
February 13, 2013 at 2:56 pm

A reply to Larry.GM is a company that creates jobs.GM stock has risen in recent years and the company has turned in a modest profit.We may get our money back if we have not already. The banks LAID off workers after the TARP bailout.The bosses in Banking-finance gave themselves golden parachute retirements and bonuses AFTER the taxpayer bailed them out.The Tarp money will NEVER be repaid and it has added to our already crushing national debt. Sen Dorgan and Brooksley Braun warned us about the impending mess years ago. Clinton and the GOP-Dem. congress politcos ignored both of them and they were laughed at and ignored. Then the same politicians including Pres. Clinton and GOP & Dems. in Congress are the ones who forced Braun out of a job and emasculated the Com. Secr. fraud unit she-Braun led.The rest is an expensive bad day in history for us taxpayers who as usual foot the bill for past financial misdeeds of the very wealthy and their stooges in DC. sad to say including Clinton and both parties in Congress.

brian
February 13, 2013 at 12:47 pm

Oh Hell no, they will never end the bailouts because the big banks are needed to keep the funny money currency scam going. Can you say 100 trillion dollars, haha a few billion here and there is a drop in the sea of gov debt and unfunded liabilities.

unhappy
February 13, 2013 at 12:38 pm

If anyone were to mismanage monies that a company makes, they would be fired. The upper management in the big banks that were bailed out took thier bonuses first and then dealt with the problems. To my knowledgement I do not think that any of the upper management were ever fired for the mismanagement of funds. This need to stop and accountability needs to come into play. Someone was responsible and that person(s) should be dealt with accordingly. If they would have distributed the bail out money (between the banks and the auto manufacturers)to the taxpayers, everyone would have been able to pay their bills, mortgages, auto loans without any problems. This would have solved many problems these big companies were having. Instead of the government considering any other bailouts, why not distribute stimulus checks like in years past.