Sen Kaufman Of Delaware To Pole-Axe Big Banks

Senator Ted Kaufman of Delaware doesn’t care what Obama says in his speech on Wall St. today or what Volcker or Dodd want to do to break apart the largest investment and money center banks.

Kaufman,  Senator Sherrod Brown of Ohio and Senator Sheldon Whitehouse of Delaware, all Democrats, simple want to crush banks by limiting the liabilities that they take on. In other words, the death of leverage.

Kaufman said that the core of his proposal is to whittle down banks by:

Imposing a strict 10 percent cap on any bank-holding-company’s share of the United States’ total insured deposits;

Reducing the maximum amount of non-deposit liabilities at financial institutions (to two percent of United States GDP for banks, and three percent of GDP for non-bank institutions);

Setting into law a six-percent leverage limit for bank holding companies and selected nonbank financial institutions.

The Senators call their initiative The Safe Banking Act. Kaufman got an Economics 101 instructor to do the math.

The dominance of a few megabanks has helped to contribute to a virtual freeze of lending to small businesses, which create about 64 percent of new jobs.

As if small banks want to lend to car dealerships and farmers

Douglas A. McIntyre