[StBernard] KANJORSKI AMENDMENT TO ADDRESS COMPANIES THAT ARE "TOO BIG TO FAIL" PASSES IN FINANCIAL SERVICES COMMITTEE

[Westley Annis]

KANJORSKI AMENDMENT TO ADDRESS COMPANIES THAT ARE 

"TOO BIG TO FAIL" PASSES IN FINANCIAL SERVICES COMMITTEE

 

WASHINGTON - Today, the House Financial Services Committee passed an
amendment offered by Congressman Paul E. Kanjorski (D-PA), Chairman of the
House Financial Services Subcommittee on Capital Markets, Insurance, and
Government Sponsored Enterprises, to the Financial Stability Improvement Act
by a vote of 38-29.  The Kanjorski amendment would empower federal
regulators to rein in and dismantle financial firms that are so large,
inter-connected, or risky that their collapse would put at risk the entire
American economic system, even if those firms currently appear to be
well-capitalized and healthy.  Therefore, American taxpayers should no
longer be on the hook for bailouts, as financial companies would not be able
to become "too big to fail." The Kanjorski amendment outlines clear and
objective standards for regulators to examine financial companies and reduce
the level of risk their activities pose to our financial stability and our
economy.

 

"Today's passage of my amendment marks a crucial step for the American
people and for the protection of our financial system," said Chairman
Kanjorski.  "I remember the dire situation we faced last fall, and we want
to do everything we can to avoid such a situation in the future.  Looking
forward, we have the capabilities to try to act in a preventative manner for
the sake of every American and our economy.  Most of us yearn for the day
when the phrase 'too big to fail' is no longer a part of our vocabulary.
Through responsible action advocated in this amendment, we can make that a
reality."

 

The Kanjorski amendment expands on a segment of the Financial Stability
Improvement Act, by enabling federal action to address financial companies
that are deemed "too big to fail" before resolution authority is needed.
The amendment transfers such mitigatory action from the Federal Reserve to
the Financial Services Oversight Council and establishes objective standards
for the Council to effectively evaluate companies to determine whether they
are systemically risky.  Additionally, the amendment provides clear checks
and balances by requiring the Council to consult with the President before
taking extraordinary mitigatory actions.  A financial company also has the
right to appeal any actions. 

 

A summary of the Kanjorski amendment follows:

 

*             Objective Standards.  Size is by no means the only factor to
determine if a financial company is "too big to fail."  The recent financial
crisis has shown that many other factors can also cause a company to become
a systemic risk.  Rather, the amendment considers a variety of objective
standards to determine if financial firms pose a threat to our financial
stability, including the scope, scale, exposure, leverage,
interconnectedness of financial activities, as well as size of the financial
company.  The Kanjorski amendment does not cap the size of financial
institutions.

*             Mitigatory Actions.  If a financial company is deemed
systemically risky, the Kanjorski amendment provides responsible
preventative actions to protect our financial system and curtail those
risks.  These include modifying existing prudential standards, imposing
conditions on or terminating activities, limiting mergers and acquisitions,
and in the most extreme cases, breaking up the company. 

*             Protects American Competitiveness.  We have learned from this
financial crisis that we are all connected.  The Kanjorski amendment
addresses the concern that our regulatory system works in conjunction with
those around the globe.  Currently, the European Union is considering
similar action, and harmonized regulations would benefit both economies. 

 

Click here
<http://kanjorski.house.gov/images/stories/09_11_18%20tbtf%20amendment%20tex
t.pdf>  to view the text of the Kanjorski amendment.

 

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