skip to main contentskip to popular page linksskip to main navigation links
photo of Mike Capuano Michael E. Capuano representing the 7th district of Massachusetts in the U.S. House of Representatives Go to the House of Representatives homepage
Like Mike on Facebook Visit Mike's video channel on YouTube Like Mike on Facebook

 

 My Schedule My Voting Record District Maps Register To Vote FAQ Site Map e-Updates


12,456 subscribers
Print Version-Reps. Capuano, Garrett Introduce Bill to Limit Fed’s Bailout Authority

PRESS RELEASE

Reps. Capuano, Garrett Introduce Bill to Limit Fed’s Bailout Authority

Legislation adds transparency to bailout authority under Section 13(3)

June 5, 2015

WASHINGTON, D.C. – U.S. Representatives Scott Garrett (R-N.J.), Chairman of the House Financial Services Capital Markets and Government Sponsored Enterprises Subcommittee, and Mike Capuano (D-MA), member of the Financial Services Committee, today introduced H.R. 2625, the Bailout Prevention Act of 2015.

During the financial crisis of 2008, the Federal Reserve used broad powers under Section 13(3) of the Federal Reserve Act to provide trillions of dollars in low-cost loans to a handful of financial institutions. While the Dodd-Frank Act included provisions that were intended to restrict some of the Fed’s broad powers under 13(3), the Fed’s proposed rule in 2014 to implement Dodd-Frank failed to make any meaningful changes, creating a need for Congressional action.

“Amidst the financial crisis of 2008, we witnessed the worst kinds of government cronyism when huge financial institutions were bailed out through section 13(3) of the Federal Reserve Act without much prudence or oversight,” said Garrett. “While Dodd-Frank promised to end the cycle of ‘too big to fail,’ all it did was codify this unfair practice into law and put the American taxpayers on the hook for untold billions—or even trillions—of dollars. I’m happy to introduce this bill with Rep. Capuano to implement the systemic changes and Congressional oversight needed to ensure that the notoriously opaque Federal Reserve is held accountable to our constituents.”

“America’s largest financial institutions received unprecedented assistance from the Federal Reserve during the crisis, much of it unknown to the Congress or public at the time,” said Capuano. “While the Dodd-Frank Act brought some reforms, the perception lingers that some financial institutions are simply Too Big to Fail and could be bailed out again. This perception has consequences favoring the biggest players in the financial system. We may not know today what the next crisis will look like, but we all have a right to know the full extent of measures that may be taken to prevent a crisis. This legislation will help protect taxpayer dollars by increasing oversight of the Federal Reserve’s emergency lending powers and bringing much needed transparency to the process.”

H.R. 2625, the Bailout Prevention Act (BPA) of 2015, would:

  • Prohibit the Fed from lending to borrowers that are insolvent. The BPA would require an institution’s relevant financial regulators to confirm that a borrower is solvent based on the previous four months of financial data, and would deem insolvent any institution that is undergoing a bankruptcy proceeding.
  • Establish a penalty rate for borrowers using a lending facility under 13(3). The BPA would require a “penalty rate” for borrowers under 13(3) of 500 basis points (5%) over comparable treasuries.
  • Establish criteria for lending facilities to be “broad-based.” The BPA would require that any lending facility under 13(3) have a minimum of five borrowers, eliminating the Fed’s ability to pick and choose whether to lend to individual institutions.
  • Require Congressional approval for facilities that do not meet the “broad-based” criteria. The BPA allows for expedited procedures in Congress if the Fed believes that loans must be made to less than five institutions due to unusual circumstances.
  • Make reports available to the public in a timely manner. The BPA would reduce public reporting time to 60 days. It would also require that GAO audits of the lending facilities are made public within 60 days after they are shut down.

Similar companion legislation was introduced last month by U.S. Senators David Vitter (R-LA) and Elizabeth Warren (D-MA).

--

Contact: Alison Mills (Rep. Capuano) 617-621-6208



12,456 subscribers

 

 

 

 

Home | About | Biography | Contact | Issues | Links | News | Schedules | Services

E-Updates | Site Map | Privacy Policy | Accessibility

110 First Street
Cambridge, MA 02141
P: (617) 621-6208
F: (617) 621-8628
Hours

Roxbury Community College
Building 2
Room 315
Boston
Hours

Stetson Hall
Room 124
6 South Main Street
Randolph
Hours

  Constituent Services Click to close menu
  Casework and Assistance
  Citizenship/Naturalization
  Immigration Casework
  Grants and Federal Domestic Assistance
  Presidential Greetings
  Flags
  Tours
  Washington, D.C. Attractions
  U.S. Service Academy Nominations
  Internships
  FAQs
  Media Center Click to close menu
  e-Updates
  Press Items
  Recent Votes
  Video and Audio
  Photos
  Legislative Work Click to close menu
  Issues
  Recent Votes
  Voting Record
  Sponsored Legislation
  Earmark Requests
  Committees and Caucuses
  Ethics Task Force
  Schedules Click to close menu
  My Schedule
  House Floor Summary
  Weekly House Schedule
  Annual House Calendar
  Weekly Senate Schedule
  Our District Click to close menu
  Maps
  Cities
  Demographics
  The 7th District Over the Years
  Nobel Prize Winners
  Interesting facts about Massachusetts
  Massachusetts Links
  Links Click to close menu
  Massachusetts Links
    State Government
    About the 7th District
    Arts, Culture and Attractions
    Chambers of Commerce
    Colleges and Universities
    Exploring Massachusetts
    Hospitals and Health Organizations
    Newspapers
    Sports

  Federal Government Links
    USA.gov - Official Government Portal
    Legislative Branch
    Executive Branch
    Judicial Branch
    Federal Agencies
    Kids' Pages
    Register to Vote
    Washington, D.C. Attractions
    Business Opportunities with the Government
  Contact Click to close menu
  District Office
  Washington, D.C. Office
  Office Hours Program
  Community Meetings
  E-mail Me