WASHINGTON — Two House Democrats on Thursday followed the lead of Sen. Sherrod Brown in proposing legislation that would impose strict caps on the size of U.S. banks.
Reps. Brad Miller and Keith Ellison introduced an identical House version of the Safe Banking Act that Brown offered in the Senate on Wednesday.
"The gigantic size of megabanks, and the perception in the marketplace that they are too big for the government ever to permit to fail, gives them an unfair competitive advantage over smaller financial institutions that distorts the market and discourages competition." Miller said in a press release. "The lack of competition in the banking industry, in turn, leads to ever-higher levels of risk in the system."
The legislation aims to close loopholes in existing rules by imposing a strict 10% cap on an institution's allowable share of the nation's deposits and liabilities.
It would also impose limits non-deposit liabilities as a share of gross domestic product, and establish a 10% leverage limit for large bank holding companies and certain nonbank financial institutions.
The measure mirrors a 2010 bill that failed to garner the necessary votes, but its supporters took heart in recent comments from Rep. Spencer Bachus, the Republican chairman of the House Financial Services Committee.
Bachus said Wednesday during a committee hearing: "We'll probably have a hearing on too big to fail, which is too big to manage, and it may be too big to exist."
Bachus went on to say that he originally held the view that the United States needs banks of all sizes, before adding: "And I guess I'm still there."
"But if that means we're going to have a bailout fund, I'm not sure that that's where I'd remain, if those were my two choices," the Alabama Republican added.