A Simple Scary Way to Neuter Goldman Sachs and Friends (GS; JPM; BAC; C; MS)

From Money Morning:

TBTF is the acronym for "too big to fail."

It's the crazy notion that certain banks are so large and systematically important (which really means so threatening to financial systems) that they must be kept alive by the government, because their failure would wreak havoc on the economy.

How will they be saved from their own greed? And how will we be saved from their greed so we can kneel at their altars another day?

Central banks and governments, who are not as powerful as central banks, will backstop them with printed paper and taxpayer blood. That's how they'll be saved, grow bigger, and one day rule the world.
 Oh, that already happened... never mind.

But wait. Now there's a new TBTF on the block. And it's even crazier than the first.
Last week Senator David Vitter (R-LA) and Senator Sherrod Brown (D-OH) introduced their own TBTF bill; it stands for "Terminating Bailouts for Taxpayer Fairness." I'm not kidding.

The Brown-Vitter Bill, as it's known - I much prefer the "TBTF Act" official title - is a thing of beauty.
It's so "in your face" (if you're a TBTF bank) that it's got a lot of those smirks on bankers' faces frozen (momentarily), making them look like the Jokers they are.

Here's what it says....

Brown and Vitter are pretty sure that the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is still mostly unwritten, is too ambitious to succeed.

Dodd-Frank is a joke because it is so unwieldy and so theoretically expansive. Not only will it never be completed, it was designed to be unwieldy so loopholes woven through all aspects of it would give banks the backdoor relief they need from it.

Brown and Vitter know this. So they've proposed legislation that leapfrogs the "molasses approach" to safeguarding the economy and the citizenry. Instead it attacks the very castles that are the TBTF banks.
They want to break them up. And they've come up with a simple way to do it.

The TBTF Act calls for banks with between $50 billion and $500 billion in assets to maintain an 8% capital ratio. Basically, that means they have to have 8% of their assets in equity, which amounts to an 8% buffer against all their assets losing 8% of their value.

Beyond that, it gets scary....MORE