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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
jmc
February 13, 2013 at 12:20 pm

In my very simplistic manner I don't believe banks should no longer get bailouts.
Some banks, like airlines, have these new added fees they keep adding on to of course which adds more money to their bottom line so-to-speak.
I know my bank after 6 transfer of funds from one account to other is the maximum, yet after that each transfer transaction charges a $35.00 fee per, unless you go the bank in person to make a transfer then there's no charge.

Finally when the banks were afforded a bailout, instead of loosening up their cash flow for consumers they instead bought out other bank institutions and made it more difficult to take out certain loans. So I say, NO MORE BAIL OUTS and no more outrageous bonuses for banks that are failing.

PBH
February 13, 2013 at 12:07 pm

The GM loan repayment was made with other TARP funds, not with GM revenue generated funds. The US Treasury still owns 61% of GM stock, the price of which has dropped precipitously since it was issued. The CBO currently estimates that the GM bailout will end up costing taxpayers $34 billion.

JulieNJ
February 13, 2013 at 11:58 am

It is not fair when taxpayers fail there is little or no help from the federal or state governments. Why should banks or other big corporations benefit from millions of taxpayer dollars that go to executives in the form of bonuses and overpaid salaries for oversight and mismanagement? When a person is fired from their job they are penalized when they try to collect unemployment benefits which don't even come close to the amount they earned while on the job. When a person is laid off they still only collect a minor percentage of what they earned in an 18 month period, not their career. In this day and age, fighting for a job is only for those who are represented by a Union. Anyone else can be terminated without cause. Where is the justification?? I have no sympathy for the banks. I will stick with my credit union...they work for me, not investors.

vernon
February 13, 2013 at 11:51 am

read your comments dam everyone agrees and lets see if they listen. Probably wont cause the back the problems in congress and we all know money talks. we can say all we want but dont mean anything. Just like our people there tey are suppose to be working for us and we pay thier saleries and they vote themselvs raises much much larger than you and i will get and we pay for all our medical they dont. I got 1.7 raise on ss and companies give if your lucky a 2-3 % raise over 2 or 3 year period they vote themselves a 10-20% and we pay for it . My way of thinking we are the employer we should vote the raise according to the work they do.

ldb
February 13, 2013 at 11:46 am

Alot of your small and med. Sized Banks never payed there TARP funds back

vernon umgelder
February 13, 2013 at 11:41 am

Eds right they got the bail out gave it to the people that work for them and money that was suppose to help out the home area was set way back on burner thats why so many houses went into forclosure and still happening cause the banks dont want to help they just want the money. They charge all the interest make themselves rich and the consumer get poor. the fees they chage should have limits and now with economy way it is companies should be allowed to make so much then get taxed at higher rate and if its sent to a hidden area all the money should be somewhere in the books for taxes. if they make so much money they should lower rates cause their not helping out the economy at all with higher rates. Their just pushing us into a deeper hole. look at it dont be BLIND.

K Williams
February 13, 2013 at 11:38 am

I don't think the big banks should be bailed out. They should do what they tell individuals to do, which is; save enough money in reserve for emergencies. If they don't, then let them raise money on their own, without taxpayer money. Last resort let them file for bankruptcy. If I were the president (at the time), I would not have bailed them out.

larry
February 13, 2013 at 11:34 am

pd in full. you need to do some research. the us government will never get its money back from gm. the stock the government took back is not worth much. we the tax payers will lose billons on the deal. smoke and mirrors.

Charmaine
February 13, 2013 at 11:32 am

Some of the banks need to fail because they get away with stealing and selling those sub-prime lending loans.Money is being used for awarding CEOS and others with big bonuses. The CEOs line their pockets with money they unfairly earned and do not deserve and go on expensive trips and have lavish life styles!All awhile these "big" banks keep hitting customers with ridiculous fees for every little thing in banking needs.Then the same banks get sued every year! Such as BOfA,CitiBank and Chase and Wells Fargo.Why let them stay open and run if they break the rules and then they get sued and have to pay out billions of dollars for the lawsuit?To turn around and do it again and then charge higher fees to make up the money they had to pay out? This has to stop. Congress has to end this and put their foot down in "they are not too big to fail! There are credit unions out there happy to take new customers!

Ed Of Ct.
February 13, 2013 at 11:21 am

It is about time they put an end to the taxpayer bailout of the corrupt badly run bank & financial system. The same folks such as Rommney etc. had nothing good to say about the aid to GM which WAS repaid. Little of the TARP money will evr be paid back.The bank execs. who should have faced jail for their repackaging bad debt a phony good debt in Credit swaps and over the counter Derivities gave themselves bonuses now that the taxpayers bailed them out.NO MORE..