Lawmakers cap leverage limits for 'too-big-to-fail' institutions

[G_j]

http://www.marketwatch.com/story/lawmakers-cap-leverage-for-big-institutions-2009-11-19-10800

Nov. 19, 2009, 10:08 a.m. EST · Recommend · Post:

Lawmakers cap leverage limits for 'too-big-to-fail' institutions
Big banks and funds couldn't have a debt to equtiy ratio of greater than 15 to 1

by Ronald D. Orol, MarketWatch

WASHINGTON (MarketWatch) -- Large systemically significant financial institutions can't over-leverage themselves and have a debt to equity ratio greater than 15 to 1, according to a provision approved by the House Financial Services Committee on Thursday.

"Leverage was a key contributor to the financial crisis," said Rep. Jackie Speier, D-Calif., the provision's author.

Rep. Brad Sherman, D-Calif., backed the provision, arguing that it would likely impact the largest 20 or 25 financial institutions while allowing smaller regional banks "which do not pose a threat to the economy" a bit more flexibility.

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The proposal was approved along with several other provisions as part of a broad bank regulatory reform bill that has been under consideration by the committee since Tuesday. The panel is expected to complete work on regulatory reform by Friday.

On Thursday, the committee is scheduled to examine a wide variety of controversial provisions, including a measure to audit the Federal Reserve and a provision that would decide which institutions would pay into a fund that would be used to dismantle a large financial institution so that its collapse does not unsettle the markets.

The Senate Banking Committee also is expected to consider bank regulatory reform legislation starting later this week and running throughout December.

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[G_j]

1. thanks to whoever got this out of unrec territory

:eyes: