Capital requirements for community banks should be raised outside of the Basel III process and through a much more simplified system of risk-weighted assets.
Three things are driving the growth of large banks: market demand, access to capital and regulatory burden created by existing and forthcoming legislation.
Regulators are not in the bank on a day-to-day basis; usually they can only judge actions after the fact and without all of the relevant information and considerations.
Megabanks may be able to fight off regulatory forces demanding their corporate downsizing, but a voluntary break up may be the only way to sway public opinion their way.
Reform efforts could result in a much smaller scope of permissible lending at the FHA, with a renewed focus on its traditional core of low-income customers, higher credit score requirements and increased down payments.
Proponents of breaking up big banks trumpet Attorney General Eric Holder's complaint that some are too large to prosecute. But indicting companies for individual employees' actions would indeed be reckless.
The nonexistence of "too big to fail" is swell news. Now taxpayers can stop worrying about future bailouts, the Federal Reserve can ease monetary policy and the Justice Department can prosecute the banks purportedly "too big to jail."
Produce a video for members of Congress to watch that focuses on a typical banking transaction and shows the various laws, regulations and other issuances that come into play at every stage of the process.
