Section 1 Short title
This Act may be cited as the “Too Big To Fail, Too Big To Exist Act”.
Too Big To Fail, Too Big To Exist Act
A BILL
To break up large financial entities.
Sec. 2 Too big to fail, too big to exist
Definitions— In this section—
the term covered entity—
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
does not include—
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.);
a governmental entity; or
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
the term gross domestic product means gross domestic product as calculated by the Bureau of Economic Analysis of the Department of Commerce.
Limitations—
In general—
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”.
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”.
Other reporting—
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.
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.
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.
Exemptions when calculating liabilities— In calculating a covered entity’s total liability to U.S. persons under this subparagraph, such calculation shall not include—
any assets under management by the covered entity; and
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.
Restructuring—
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”.
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”.
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.
Prohibition on use of insured deposits—
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—
any activity relating to hedging that is not directly related to commercial banking activity at the insured bank;
any creation or use of derivatives for speculative purposes;
any activity related to the dealing of derivatives;
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
any other form of speculative activity that regulators specify.
Risk of loss— A “Too Big To Exist Institution” may not conduct any activity listed in paragraph (1) in such a manner that—
puts insured deposits at risk; or
creates a risk of loss to the Deposit Insurance Fund.
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).
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”.