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?