[StBernard] Committee Passes Financial Stability Legislation, Ends Taxpayer Bailouts

[Westley Annis]

Committee Passes Financial Stability Legislation, Ends Taxpayer Bailouts

Bill ends "too big to fail" on Wall Street; all resolution costs are borne
by the financial industry

 

Washington, DC - Today, the Financial Services Committee approved
legislation that will put an end to "too big to fail" financial firms, help
prevent the failure of large institutions from becoming a systemwide crisis,
and ensure that taxpayers are never again left on the hook for Wall Street's
reckless actions. The Financial Stability Improvement Act
<http://financialservices.house.gov/pdf/Summary_hr3996_final.pdf>  (H.R.
3996), which passed by a vote of 31-27, marks the ninth major bill approved
by the committee this year to modernize America's financial rules. Once
signed into law, this comprehensive set of reforms will work in tandem to
address the myriad causes - from predatory lending to unregulated
derivatives - that led to last year's crisis. 

H.R. 3996 <http://financialservices.house.gov/pdf/Summary_hr3996.pdf>
specifically targets the issue of systemic risk within the financial system
and the potential harm that regulatory gaps and large, interconnected
companies like AIG can pose to the economy. The legislation will: 

*                    Identify and subject systemically risky firms to
increased scrutiny and regulation: H.R. 3996 will create an inter-agency
oversight council that will identify and monitor financial firms and
activities that could potentially undermine the nation's financial
stability. Once identified, these firms and activities will be subject to
stricter oversight, standards, and regulation. 

*                    Ensure that the collapse of a large, interconnected
financial institution does not lead to another taxpayer bailout or
jeopardize the economy: Currently, there is no system in place to
responsibly shut down a failing financial company like AIG or Lehman
Brothers. This bill establishes an orderly process for the dismantling any
large failing financial institution in a way that protects taxpayers and
minimizes the impact to the financial system. 

*                    Hold Wall Street accountable for its actions: If a
large institution fails, the bill holds the financial industry and
shareholders responsible for the cost of the company's orderly wind down,
not taxpayers. Under H.R. 3996, any costs for dismantling a failed financial
company will be repaid first from the assets of the failed firm at the
expense of shareholders and creditors. Any shortfall would then be covered
by a "dissolution fund" pre-funded by large financial companies with assets
of more than $50 billion and hedge funds with assets of more than $10
billion. 

 

For further details on today's legislation, click here
<http://financialservices.house.gov/pdf/Summary_hr3996.pdf> .

To learn more about the other financial reform bills approved by the
committee, click here
<http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/F
inancial_Regulatory_Reform.html> .

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