In addition, the legislation will be scalable and crate a two-tier system under which smaller and to pay less risky financial institutions, such as community banks would be subject to a more appropriate regulatory framework. The legislation will also fundamentally require significantly more capital for the large financial institutions and distinguish between those institutions and other financial firms, such as namely, community banks, midsized banks, and regional banks. The largest financial institutions would have to pay significantly higher capital requirements under the Brown-Vitter bill.
When these large financial institutions go into the capital markets, noted Senator Brown, they get the advantage of up to 80 basis points because the capital markets believe their investments in thesefirms are not very risky because the markets believe that they are too big to fail. Cong Rec. Feb 28, 2013, S. 966).
While Senator Brown’s proposed amendment, S.Amdt. No. 3733, to the Dodd-Frank Act to impose leverage and liability limits on bank holding companies and financial companies failed in 2010 in the runup to the passage of the Act was defeated by a vote of 61-33, the Senators believe that a strong consensus is building today towards passage of similar legislation. Three Republican Senators voted for the Brown Amendment, and that did not include Senator Vitter, who did not vote on the amendment. They pointed out that Senator Elizabeth Warren has joined the Senate and is expected to be a strong proponent of the legislation.
Just as Senator Sherman spoke against the trusts in the late 19th century, noted Senator Brown, today people across the political spectrum, both parties and all ideologies, are speaking about the dangers of the large, concentrated wealth of large financial institutions.According to the Comptroller of the Currency, said Senator Brown, none of these large financial holding companies have adequate risk management.. In stress tests, not one of the largest 19 financial institutions has shown adequate risk management.