Too Big To Fail, Too Big To Exist Act

Bill: 115-hr-7383
Sponsor: full_name: Rep. Sherman, Brad [D-CA-30]
Introduced: 2018-12-20
Policy area: Finance and Financial Sector
Subjects: Bank accounts, deposits, capital

Banking and financial institutions regulation

Congressional oversight

Corporate finance and management

Credit and credit markets

Economic performance and conditions

Federal Reserve System

Financial services and investments

Government information and archives

Securities
Latest action: action_date: 2018-12-20
text: Referred to the House Committee on Financial Services.

Summaries:
action_date: 2018-12-20
action_desc: Introduced in House
text: <p><b>Too Big To Fail, Too Big To Exist Act</b></p> <p>This bill&nbsp;provides for the restructuring of&nbsp;financial institutions with specified exposure and financial-risk characteristics.</p>

tv_txt: I 115th CONGRESS 2d Session H. R. 7383 IN THE HOUSE OF REPRESENTATIVES December 20, 2018 Mr. Sherman introduced the following bill; which was referred to the Committee on Financial Services A BILL To break up large financial entities.

1. Short title This Act may be cited as the Too Big To Fail, Too Big To Exist Act . 2. Too big to fail, too big to exist (a) Definitions In this section— (1) the term covered entity — (A) means a financial institution, as defined in section 803 of the Payment, Clearing, and Settlement Supervision Act of 2010 ( 12 U.S.C. 5462 ); and (B) does not include— (i) a Farm Credit System institution chartered under and subject to the provisions of the Farm Credit Act of 1971 ( 12 U.S.C. 2001 et seq.); (ii) a governmental entity; or (iii) a regulated entity, as defined in section 1303 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4502 ); and (2) the term gross domestic product means gross domestic product as calculated by the Bureau of Economic Analysis of the Department of Commerce. (b) Limitations (1) In general (A) In general On February 1, May 1, August 1, and November 1 of each year, no covered entity may be a Too Big To Exist Institution . (B) Entities required to file Federal Reserve systemic risk profile form If, on February 1, May 1, August 1, or November 1 of any year, a covered entity has a total exposure, as reported by the covered entity on the Federal Reserve form required to monitor the systemic risk profile of financial institutions for the previous reporting period, equal to or greater than 3 percent of the most recent estimate for annual gross domestic product of the United States (in current dollars) for the previous calendar year, the Financial Stability Oversight Council may designate such covered entity as a Too Big To Exist Institution . (C) Other reporting (i) In general If a covered entity is not required to complete the Federal Reserve form required to monitor the systemic risk profile of financial institutions, the Financial Stability Oversight Council shall design and assign a quarterly reporting form as appropriate for each covered entity with total assets greater than $50,000,000,000 that reflects the total liability to U.S. persons of the financial institution, within 18 months of the date of enactment of this Act. (ii) Designation of companies with total liability to U.S. persons between 3 to 4 percent of GDP If, on February 1, May 1, August 1, or November 1 of any year, a covered entity described under clause (i) has a total liability to U.S. persons, as reported by the covered entity on the form described under clause (i), equal to or greater than 3 percent but less than 4 percent of the most recent estimate for annual gross domestic product of the United States (in current dollars) for the previous calendar year, the Financial Stability Oversight Council may designate such covered entity as a Too Big To Exist Institution , if the Council determines such designation is appropriate. (iii) Designation of companies with total liability to U.S. persons over 4 percent of GDP If, on February 1, May 1, August 1, or November 1 of any year, a covered entity described under clause (i) has a total liability to U.S. persons, as reported by the covered entity on the form described under clause (i), greater than 4 percent of the most recent estimate for annual gross domestic product of the United States (in current dollars) for the previous calendar year, the Financial Stability Oversight Council may designate such covered entity as a Too Big To Exist Institution , if the Council determines such designation is appropriate. (iv) Exemptions when calculating liabilities In calculating a covered entity’s total liability to U.S. persons under this subparagraph, such calculation shall not include— (I) any assets under management by the covered entity; and (II) with respect to a covered entity that is an insurance company, any liabilities to pay out an insurance claim, so long as the insurance company meets all capital standards set by any State that regulates the insurance company. (2) Restructuring (A) Supervision The Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, or during any period in which that position is vacant, the Chair of the Board of Governors of the Federal Reserve System, shall require and supervise a Too Big To Exist Institution to restructure such that the entity is no longer a Too Big To Exist Institution not later than 2 years after the date on which the entity was designated as a Too Big To Exist Institution . (B) Subsequent requirements After the date on which a covered entity is required to restructure under subparagraph (A), the Vice Chair for Supervision of the Board of Governors of the Federal Reserve System or, during any period in which that position is vacant, the Chair of the Board of Governors of the Federal Reserve System, shall require and supervise any Too Big To Exist Institution to restructure such that the entity is no longer a Too Big To Exist Institution not later than 1 year after the entity is again designated as a Too Big To Exist Institution . (c) Prohibition against use of Federal Reserve financing Notwithstanding any other provision of law (including regulations), any Too Big To Exist Institution may not use or otherwise have access to advances from any Federal Reserve credit facility, the Federal Reserve discount window, or any other program or facility made available under the Federal Reserve Act ( 12 U.S.C. 221 et seq.), including any asset purchases, temporary or bridge loans, government investments in debt or equity, or capital injections from any Federal institution. (d) Prohibition on use of insured deposits (1) In general Any Too Big To Exist Institution that is an insured depository institution, or owns such an institution, may not use any insured deposit amounts to fund— (A) any activity relating to hedging that is not directly related to commercial banking activity at the insured bank; (B) any creation or use of derivatives for speculative purposes; (C) any activity related to the dealing of derivatives; (D) any creation of, or lending against, new or existing forms of structured or structured derivatives products, including col­lat­er­a­lized debt obligations, col­lat­er­a­lized loan obligations, and synthetic derivatives of col­lat­er­a­lized debt obligations and col­lat­er­a­lized loan obligations; or (E) any other form of speculative activity that regulators specify. (2) Risk of loss A Too Big To Exist Institution may not conduct any activity listed in paragraph (1) in such a manner that— (A) puts insured deposits at risk; or (B) creates a risk of loss to the Deposit Insurance Fund. (e) Report; testimony The Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, or during any period in which that position is vacant, the Chair of the Board of Governors of the Federal Reserve System, and the Chair of the Financial Stability Oversight Council shall annually testify before the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives and submit to those committees an annual report the restructuring and designation under subsection (b)(2). (f) Effective date Subsections (c) and (d) shall apply to a covered entity 90 days after the date on which a covered entity is designated as a Too Big To Exist Institution .