"Today's report confirms that in times of crisis, the largest megabanks receive an advantage over
"We can fix Too Big to Fail by passing our bipartisan legislation which would ensure that
Brown and Vitter requested the report in 2013. A copy of their letter to GAO can be found: HERE.
GAO's study examined size-based funding costs by comparing fixed-rate senior unsecured bonds issued by banks holding companies (BHCs) from 2006 through 2013. GAO used 16 studies that met certain criteria for relevance and rigorousness.
Rather than provide definitive numbers of a basis point (bp) funding advantage and an associated dollar figure, GAO provided the full range of findings based upon the different variables the report utilized.
GAO found that while funding cost differences may have declined or reversed in recent years, this change may be due to improvements in bank holding companies' financial conditions and low borrowing costs. Implied in GAO's analysis is that investors view all institutions as being relatively safe because of the nature of the current financial sector. The report suggests that under more normalized credit conditions, or if there was another crisis tomorrow, investors would flock to the institutions that they believe are Too Big to Fail. Further, the report confirms that the advantages
To supplement its empirical work, GAO also sought anecdotal evidence from market participants, including investment firms, pension funds, and insurance companies that invest in banks, and non-financial corporate bank clients. The GAO met with six corporate treasurers, all arranged through the
The nation's largest
Brown-Vitter, or the Terminating Bailouts for Taxpayer Fairness Act (TBTF Act), would ensure that financial institutions have adequate capital to protect against losses. Specifically, the TBTF Act would:
* Set reasonable capital standards that would vary depending on the size and complexity of the institution;
* Limit the government safety net to traditional banking operations; and
* Provide regulatory relief for community banks. Provide regulatory relief for community banks.
TNS 30TagarumaMar-140801-4816625 30TagarumaMar
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