From Rep, Mike Capuano‘s (D-MA) e-newsletter yesterday:
New Federal Reserve Chair Janet Yellen appeared this week before the Financial Services Committee to deliver the Federal Reserve’s semi-annual report to Congress. When I had the opportunity to ask her a few questions I brought up the perception that many financial institutions are still considered “Too Big to Fail” despite recent controls put in place by Dodd Frank financial regulatory reform. I spoke about the possibility of reinstituting some provisions of the Glass-Steagall Act, which was repealed more than a decade ago. Glass Steagall required a separation between commercial and investment banking and many, including myself, believe that the easing of this separation contributed to the financial crisis in 2008.
I also raised the possibility of employing a market-driven limitation on size such as the approach taken through my legislation, H.R. 2266, the Subsidy Reserve Act of 2013. H.R. 2266 requires financial entities with assets over $500 billion to maintain a subsidy reserve account on its balance sheet. The idea behind the subsidy reserve is to require the financial entities that are perceived as “too big to fail” to set aside funds each year that they could not access for any reason.
The most interesting response I received from Federal Reserve Chair Yellen came when I asked her about a recent editorial in American Banker that pointed out the moral hazard of not prosecuting certain bankers on a personal basis for any wrongdoing and instead allowing them to write corporate checks as restitution. Chair Yellen’s response was: “I agree with you that there certainly should be accountability within these organizations.” That answer certainly sounds to me like she agrees that no one should be Too Big to Jail and I was glad to hear it. I am attaching the hearing video as well as the editorial for your review.
http://www.americanbanker.com/bankthink/how-feds-double-standard-enables-bad-bankers-1065367-1.html
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