Thursday, January 21, 2010

Kanjorski Statement on Bank Restrictions

From the inbox:


President’s Proposal Molded After Kanjorski Amendment to Address Companies that Are “Too Big To Fail” and Prevent Future Bailouts

WASHINGTON – Today, Congressman Paul E. Kanjorski (PA-11), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, provided the following statement supporting the President’s proposal to limit the size and scope of financial institutions and better protect taxpayers by preventing companies that are deemed “too big to fail” to exist. The President’s proposal is similar to the Kanjorski amendment that was included in H.R. 4173, the Wall Street Reform and Consumer Protection Act, which the House passed on December 11. 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.”

“I applaud President Obama for joining me in working to end the era of reckless financial institutions that have become so large and interconnected that they could be deemed ‘too big to fail’,” said Chairman Kanjorski. “A year and a half ago, Congress took drastic, but necessary action, to prevent an economic disaster that would have severely affected every American and set back our financial system by decades. But, many of the financial companies do not seem to have learned their lessons from that harrowing experience. In November, I took the first action in Congress to prevent companies from becoming too interconnected and risky by introducing an amendment, which was included in the House-passed Wall Street reform bill, to prevent companies from becoming ‘too big to fail.’ Now that the President has put forward a similar proposal, I hope that we can work to enact Wall Street reform that will better protect every American and ensure that no single company can pose a risk to the entire economy. We owe it to the American people to make these ideas a reality.”

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 a financial 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.

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