WASHINGTON, DC— U.S. Senator Bob Casey (D-PA) today spoke on the Senate floor to urge passage of an amendment that would limit the size of the big banks and prevent the concentration of assets on Wall Street that helped lead to the global financial crisis. Senator Casey is an original cosponsor of the amendment.
“The mega-banks have too much power concentrated in them and too large an impact on our system,” said Senator Casey. “These banks are such big institutions and have tentacles reaching so far into the economy that the failure of one or more of these institutions can wreck the economy. That is why I am supporting an amendment to limit the size of the mega-banks and end “too big to fail.”
Concentration in the banking industry has shifted power to Wall Street while reducing the focus and lending on Main Street. Fifteen years ago, the six largest banks had assets equal to 17 percent of overall GDP; today, total assets are estimated to be in excess of 63 percent of GDP.
The amendment -- based on the SAFE Banking Act that Senator Casey also supports -- would change the size, leveraging and capital requirement standards of “megabanks” in order to prevent financial institutions from becoming “too big to fail”. These common-sense changes would limit the size and exposure of financial institutions and ensure that when banks take financial gambles they have the resources to cover their potential losses.
The amendment would limit the size of these megabanks by:
• Imposing a strict 10% cap on any bank-holding-company’s share of the United States’ total insured deposits.
• Limits the size of non-deposit liabilities at financial institutions (to 2% of United States GDP for banks, and 3% of GDP for non-bank institutions).
• Sets into law a 6% leverage limit for bank holding companies and selected nonbank financial institutions.
The Senate is currently debating Wall Street Reform legislation. Senator Casey said of the bill: “We've got to have strict regulations to stop Wall Street from engaging in reckless activity. We've got to stop the reckless gambling that Wall Street was engaged in for far too long. We've got to end taxpayer bailouts forever. We need tough regulations and tough enforcement. And we've got to put consumers in control with information about transactions that are in plain English.”