COMMUNITY BANKS ARE DYING OF DODD-FRANK
Jeb Hensarling introduced a Republican proposal today that would provide an offramp to Dodd-Frank, but it would first require Wall Street banks to raise capital ratios to 10%, from current levels of 6%. Most small banks already have leverage ratios of 10% or greater.
Wall Street banks would be able to break away from the 2010 Dodd-Frank regulatory-overhaul law under a Republican plan—but it would cost them billions of dollars.
The GOP plan released on Tuesday would provide financial institutions, large and small, an alternative to the existing postcrisis regulatory regime. They would be allowed to opt in to the alternative plan if they can surpass critical thresholds, including a 10% leverage ratio, which is a measure of capital held by a bank against its total assets and hence curbs the amount of borrowing, or leverage, banks can do.
“While a 10% leverage ratio may seem high by current standards, history suggests it is far from abnormal,” said Mr. Hensarling, endorsing a threshold long advocated by FDIC Vice Chairman Thomas Hoenig.
Wall Street firms have balked at the leverage ratio, saying it curtails lending and saddles them with more costs that leave them at a competitive disadvantage against foreign banks with lower capital requirements.
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HERE'S THE FULL INTERVIEW
HENSARLING PITCHES AN OFFRAMP FOR DODD-FRANK
With Obama ready to veto, there is absolutely no chance this bill will pass this year, but it does provide a roadmap out of Dodd-Frank that actually increases leverage ratios, and reduces the risk of future taxpayer bailouts.