Brown, Bair See Traction on Big Bank Breakup

WASHINGTON — Political support for ending "too big to fail" is growing, said several prominent observers during a panel discussion on Tuesday.

Sen. Sherrod Brown, former Federal Deposit Insurance Corporation Chairman Sheila Bair and former Utah Gov. Jon Huntsman, who have all argued that "too big to fail" is alive and well, debated policy solutions and remaining hurdles at an event hosted by the Petersen Institute for International Economics in Washington, DC. They also expressed surprise for how quickly the issue seems to be gaining momentum lately.

Brown, who is teaming up with Sen. David Vitter, R-La., to write a bill addressing "too big to fail" and the regulatory burden on small banks, said that interest among his colleagues in the Senate is on the rise. The Ohio Democrat previously introduced an amendment to the Dodd-Frank reform bill with former Sen. Ted Kaufman, D-Del., to raise capital standards that garnered just 33 votes in May 2010.

But he said on the panel Tuesday that a vote on a similar freestanding bill today could likely attract closer to 45 votes.

"I think the politics has changed, but I think it's not nearly there yet," Brown said, adding that his office is in talks with 10 Republican senators who have expressed some interest on these issues. "I think that a number of members, not a majority, but a number of members of the Banking Committee have said they either made a mistake or would vote our way this time."

He added: "We are today at a place I wouldn't have imagined a year ago we would be because the public and policymakers are starting to figure this out and starting to pay more attention, and part of because of the fear of what could happen as these institutions get larger and larger."

Huntsman, a Republican who unveiled his own plan for addressing "too big to fail" during the presidential primary campaign in 2011, added that the issue is taking hold with policymakers and others quicker than he expected.

"It may take another election cycle for us to get there. It has to rise, it has to resonate, it has to find its proper queue in the hierarchy of issues. It can't be number ten — it's got to be number three or four in order for people to really start paying attention," he said. "How do you take the passion and emotion around a very legitimate issue and then begin to sort it out based on the facts, the risks, the fixes and the real policy solutions? That will probably take a little bit of time. I'm actually surprised that this issue has moved as quickly as it has."

But the panelists warned that hurdles remain, including pushback from the powerful banking lobby.

"Day in and day out, large financial institutions have a lot of lobbyists and law firms here. And I don't fault them for that — they're in the business of making money, so they're like everyone that comes to Washington to try to advocate their case," said Bair.

But she added that such advocacy was "lopsided" relative to public concerns. "What the vast majority of the population wants to happen, meaningful reform, doesn't happen because you have this lobbying pressure."

Bair also took the Obama administration to task for its role, or lack thereof, in addressing some of these issues.

"I think we need more leadership from the administration too. I don't think we got the leadership we needed during Dodd-Frank, and that needs to be part of the solution. But we're still not getting much leadership from the administration on these issues," she said. "The capture, a lot of people say, is bipartisan. And when I say capture, I'm talking about cognitive capture. It's not so much about corruption. It's just listening too much to large financial institutions and the people who represent them and not enough to the people out on Main Street who want this fixed."