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ICBA: Greatest Threat to Financial System is Too Big To Fail


June 26 - The Independent Community Bankers of America has told Congress that the greatest ongoing threat to the safety and soundness of the U.S. financial system is the dominance of a small number of too-big-to-fail megabanks. In a statement for a House Financial Services Committee hearing on taxpayer-funded bailouts, ICBA wrote that a more diverse financial system would reduce risk and promote competition, innovation and the availability of credit to consumers and businesses.
“Addressing the threat posed to taxpayers, our financial system and the economy by a few too-big-to-fail firms is a top priority for community banks,” ICBA wrote. “The U.S. will not have a robust and truly competitive market for financial services until the too-big-to-fail problem is definitively resolved.”
ICBA’s statement notes that four years after the Wall Street financial crisis, the nation’s largest megabanks have grown by more than $1 trillion in assets due to government support and its distortionary impact on market competition. The government too-big-to-fail subsidy for megabanks is worth an estimated $83 billion per year, according to Bloomberg View, offering these firms a clear competitive advantage, fueling further industry concentration and increasing systemic risk.

Meanwhile, Washington’s response to the financial crisis of stricter banking regulations too often affects even the low-risk community banks that did not cause the crisis and pose no systemic threats, posing disproportionate burdens on these institutions and the communities they serve.
In its statement, ICBA noted that it is open to considering any constructive proposal to address the too-big-to-fail problem, including the contributions of the hearing’s witnesses — Federal Reserve Bank of Dallas President and CEO Richard Fisher, FDIC Vice Chairman Thomas Hoenig, Federal Reserve Bank of Richmond President and CEO Jeffrey Lacker and former FDIC chairman Sheila Bair.

ICBA noted that it also has endorsed the Terminating Bailouts for Taxpayer Fairness (TBTF) Act (S. 798), introduced by Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.), which would require the largest and riskiest banks to hold more leverage equity capital to reduce their risks and avoid future taxpayer bailouts. The association also advocated its Plan for Prosperity legislative agenda to offset the growing regulatory burden on community banks and their customers caused by the fallout of too big to fail.
For more information on too big to fail, to read ICBA’s “End Too-Big-To-Fail” white paper or to view ICBA’s “Turn Up the Heat, End Too-Big-To-Fail” video, visit