Chairman Campbell: "Too Big To Fail" Problem Has Not Been Fixed
February 12, 2013
Representative John Campbell (R-CA), Chairman of Financial Services Subcommittee on Monetary Policy and Trade, discusses new legislation to eliminate "Too Big to Fail" with Peter Cook on Bloomberg Television's "In the Loop with Betty Liu". Campbell's legislation, the Systemic Risk Mitigation Act, would prevent future taxpayer-funded bailouts of large financial institutions that currently pose a systemic risk.
"What this proposal does is makes large banks get a new layer of capital that is 15% of your assets," said Rep. Campbell. "That new capital is first loss capital, so it's the proverbial canary in the coal mine. This will put a lot of private capital ahead of the taxpayer in order to protect the taxpayer and will hopefully equalize the competitive nature between big banks and little banks."
The Systemic Risk Mitigation Act would set up a safe and stable banking sector in which banks are free to operate as they wish, so long as they are capitalized at a level which will allow for their independent failure without triggering widespread, economic collapse. Campbell's bill would set up a comprehensive regulatory structure requiring financial institutions to hold a second layer of capital for the purpose of minimizing the extent to which their failure would precipitate broader market and economic turmoil.
Campbell's legislation has been referred to the House Committee on Financial Services.