The long awaited Government Accountability Office (GAO) report, requested by Senators Sherrod Brown (D-OH) and David Vitter (R-LA), confirms the findings of a number of recent studies on the decline in funding advantage for the largest U.S. banks. Using the most recent data, and a number of different methodologies on bank funding, the report shows that any advantage for America’s largest banks that is attributable to expectations of another bailout has declined to a minuscule amount or even been reversed. That fact, coupled with the costs of new regulation for the largest six institutions, means that being above $500 billion in assets is now, quite possibly, a competitive disadvantage.
In this week’s piece, Dodd Frank’s Four Years of Doing Nothing, Bloomberg View editors fail to mention material and important changes that have taken place in the financial system since the crisis that undercut the thesis of their column. To be fair, this was an opinion piece and opinions are one thing, but let’s review the facts on the changes that have taken place – initiated by the industry, regulators and Congress – to make today’s U.S. financial system safer, less complex and capable of providing capital to fuel the economy.
ForumBlog: Section 165 of the Dodd-Frank Act Establishes an Iterative Process of Submission and Review of Living Wills
During the semi-annual Humphrey-Hawkins testimony of Federal Reserve Chair Janet Yellen before the Senate Banking Committee on Tuesday, July 15th, Senator Elizabeth Warren (D-MA) questioned Chair Yellen about the Federal Reserve’s review of resolution plans, commonly referred to as “living wills,” which is part of Section 165 of the Dodd-Frank Act and requires large bank holding companies and large nonbank financial companies supervised by the Fed to submit to the Fed and FDIC each year. Such plans are intended to facilitate the bankruptcy and orderly dismantling of an institution in the event of failure. Chair Yellen correctly responded that Dodd-Frank establishes an iterative process of submission of living wills by supervised institutions, review of those submissions by the Fed and FDIC, notification of the supervised institutions regarding any needed improvements, and re-submission of amended plans.
TTIP isn’t a big issue on the radar in Washington, but it really should be if we care about U.S. jobs. The TTIP - along with the negotiation of a U.S.-China Bilateral Investment Treaty - offers a massive opportunity for the U.S. economy by increasing market opportunities for U.S.-based financial services firms. Defying the “Great Recession,” America’s export of services have grown approximately 30% since 2008, and, according to the International Trade Administration, now support almost 3 million U.S. jobs. Unfortunately, without a shift in approach on regulatory issues, the huge market access opportunities in Europe that the Obama Administration says it still seeking in the TTIP talks may remain elusive.