Weekend Economists Give Two Thumbs Up for Roger April 5-7, 2013

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30. Senators Draft Higher Capital Requirement for Biggest U.S. Banks

http://www.bloomberg.com/news/2013-04-05/senators-to-propose-higher-capital-for-banks-over-400-billion.html

The largest U.S. banks, including JPMorgan Chase & Co. (JPM) and Bank of America Corp., would have to hold capital in excess of Basel III standards under a proposal being drafted by Senate Democrats and Republicans to curb the size of too-big-to-fail banks.

The current draft of the legislation would require U.S. regulators to replace Basel III requirements with a higher capital standard: 10 percent for all banks and an additional surcharge of 5 percent for institutions with more than $400 billion in assets. Senators Sherrod Brown, a Democrat from Ohio, and David Vitter, a Republican from Louisiana, have said they intend to introduce the bill this month.

The measure comes amid calls by regulators including Federal Reserve chairman Ben S. Bernanke to do more to rein in the size of so-called too-big-to-fail banks, a term used to describe institutions perceived to be so big and important that taxpayers would be compelled to prevent their failure. The proposal’s authors have said it incorporates ideas from FDIC Vice Chairman Thomas Hoenig, Dallas Federal Reserve President Richard Fisher and former FDIC Chairman Sheila Bair.

Analysts including Jaret Seiberg of Guggenheim Securities LLC’s Washington Research Group said that the bill doesn’t yet have enough support to become law. Still, its bipartisan support means it has a better chance of passage than other proposals.