Brown, Vitter Officially Unveil 'Too Big to Fail' Bill

WASHINGTON — Washington's "odd couple" Sens. Sherrod Brown, D-Ohio, and David Vitter, R-La., released their much anticipated bill to tackle "too big to fail" on Wednesday, which included high capital standards for the largest institutions and regulatory relief for smaller banks.

The bill would set a 15% capital requirement for institutions with $500 billion of assets and an 8% requirement for regional banks with between $50 billion and $500 billion of assets. The sweeping bill would also impose a number of additional changes on the industry, such as scrapping proposed Basel III requirements, requiring bank subsidiaries to capitalize separately and restricting the ability of bank holding companies to move assets or liabilities across banking and non-banking affiliates.

The bill contains a number of provisions designed to help community banks, including an expansion of the definition of "rural" lenders so that more institutions can provide balloon mortgages under the Consumer Financial Protection Bureau's qualified mortgage rule. It would also establish a bank examiner ombudsman to hear appeals from banks, adopt a measure pending in the Senate that would allow banks to forgo sending out annual privacy notifications if the disclosures haven't changed and make it easier for small institutions to raise capital and pay dividends.

The bipartisan bill "will help ensure that even the biggest banks have proper capital reserves, enough reserve s to back up their sometimes risky practices so taxpayers don't have to," Brown said at a press conference on Wednesday.

Brown and Vitter did not announce any bill co-sponsors, but said they are reaching out to lawmakers and having "productive conversations" with members on both sides of the political aisle.

"I think there's impatience among a number of people in the financial services community that support our efforts and among businesses and certainly among senators that the Dodd-Frank implementation has been so slow, and we have not gotten yet much of an impact of that regulation. And that's why I think that impatience speaks to 'let's move on this,'" said Brown. "Look back to 2010, we only got 33 votes on the original Brown-Kaufman. It's clear that we have more support than that now, and I think it will continue to grow."

Still, the lawmakers acknowledged that the bill faces an uphill battle in the Senate.

"There are obviously interests working overtime against us," Vitter said at the press conference. "But I think clearly there's been building momentum for this approach over the last year."

That likely includes the top leaders of both parties on the Banking Committee. Neither Sen. Tim Johnson, the panel's chairman, nor Sen. Mike Crapo, it's top GOP member, have expressed support for the measure — and it is also almost certain to be opposed by the Obama administration. Mary Miller, the Treasury Department's undersecretary for domestic finance, defended the White House's position that the Dodd-Frank reform law ended "too big to fail" in a speech last week.

"The Treasury Department seems to have something at stake in Dodd-Frank, that it has solved the problem," said Brown. "I think [Federal Reserve Board Chairman Ben] Bernanke recognizes this issue, I think most serious-minded regulators do. We'll continue to work with Treasury."

The lawmakers added that the majority of regional banks are likely to accept an 8% capital requirement, a figure they said was suggested by former Federal Deposit Insurance Corporation Chairman Shelia Bair.

"I think they're very comfortable with that in general," said Vitter. "I think the only pushback we've gotten at the upper end of that group is frankly megabank wannabes who want to be part of a big transaction in two months and want to get over the $500 billion mark."