Reaction to Brown-Vitter TBTF Bill; Capital One Settles Over Loan Losses; A Possible Fed Successor

Receiving Wide Coverage ...

Brown-Vitter TBTF Bill: Sens. Sherrod Brown and David Vitter formally unveiled their TBTF bill — or the pointedly named Terminating Bailouts for Taxpayer Fairness Act — Wednesday. Key components include a 15% capital requirement for banks with more than $500 billion in assets. Regional banks would be required to meet an 8% capital requirement while community banks would be exempt from the proposal. The bill, if passed, would also impose restrictions on a bank holding company's ability to move assets or liabilities from nonbanking to banking affiliates. (You can find a full roundup of its central elements here.) "Requiring the largest banks to finance themselves with more equity and with less debt will provide them with a simple choice," the senators explained in a New York Times op-ed. "They can either ensure they can weather the next crisis without a bailout, or they can become smaller." Reaction to the bill, thus far, appears to include some general support ("This is the appropriate direction for regulation," writes Slate blogger Matthew Yglesias), calls to give existing legislation a chance ("I'm fighting for [Dodd-Frank]," Sen. Carl Levin tells Bloomberg. "I can't at the same time give up on that and say 'break up the banks.'") and early Wall Street rallying cries. Whether the bill can actually pass is another issue entirely. "Brown and Vitter may have a difficult time getting their bill through Congress," the Washington Post notes. The bill does "not appear to have — at least so far — broad enough support in Congress to move forward," the FT echoes. "[It] was not immediately endorsed by any co-sponsors, for instance, and Mike Crapo, the top Republican on the Senate banking committee, recently disavowed the need for more stringent capital standards to be set by law."

Capital One Settlement: Capital One has agreed to pay the Securities and Exchange Commission $3.5 million to settle allegations the bank underreported millions of dollars in auto loan losses just prior to the financial crisis. Two executives also agreed to pay penalties collectively totaling $135,000 as part of the settlement. Par for the course, the bank neither admitted nor denied wrongdoing. Dealbook says the settlement "illustrates a common misdeed" of the financial crisis: "As losses mounted in 2007 and 2008, some Wall Street firms covered up the woes from the public." Washington Post, Wall Street Journal

Financial Times