SIL18A91 S.L.C. 115TH CONGRESS 2D SESSION S. ll To break up large financial entities. IN THE SENATE OF THE UNITED STATES llllllllll llllllllll introduced the following bill; which was read twice and referred to the Committee on llllllllll A BILL To break up large financial entities. 1 Be it enacted by the Senate and House of Representa- 2 tives of the United States of America in Congress assembled, 3 SECTION 1. TOO BIG TO FAIL, TOO BIG TO EXIST. 4 (a) DEFINITIONS.—In this section— 5 (1) the term ‘‘covered entity’’— 6 (A) means a financial institution, as de- 7 fined in section 803 of the Payment, Clearing, 8 and Settlement Supervision Act of 2010 (12 9 U.S.C. 5462); and 10 (B) does not include— 11 (i) a Farm Credit System institution 12 chartered under and subject to the provi- SIL18A91 S.L.C. 2 1 sions of the Farm Credit Act of 1971 (12 2 U.S.C. 2001 et seq.); 3 (ii) a governmental entity; or 4 (iii) a regulated entity, as defined in 5 section 1303 of the Federal Housing En- 6 terprises Financial Safety and Soundness 7 Act of 1992(12 U.S.C. 4502); and 8 (2) the term ‘‘gross domestic product’’ means 9 gross domestic product as calculated by the Bureau 10 of Economic Analysis of the Department of Com- 11 merce. 12 (b) TOTAL EXPOSURE.— 13 14 (1) TOTAL EXPOSURE.— (A) IN GENERAL.—On February 1, May 1, 15 August 1, and November 1 of each year, no 16 covered entity may have a total exposure, as re- 17 ported by the covered entity on the Federal Re- 18 serve form required to monitor the systemic 19 risk profile of financial institutions for the pre- 20 vious reporting period, equal to or greater than 21 3 percent of the most recent estimate for an- 22 nual gross domestic product of the United 23 States (in current dollars) for the previous cal- 24 endar year. SIL18A91 S.L.C. 3 1 (B) OTHER REPORTING.—If a covered en- 2 tity is not required to complete a Federal Re- 3 serve form required to monitor the systemic 4 risk profile of financial institutions, the Finan- 5 cial Stability Oversight Council shall design and 6 assign a quarterly reporting form as appro- 7 priate for each covered entity with total assets 8 greater than $50,000,000,000 that reflects the 9 total risk exposures of the financial institution, 10 including off-balance sheet exposures and de- 11 rivatives exposure within 18 months of the date 12 of enactment of this Act. Once designated a re- 13 porting form, on February 1, May 1, August 1, 14 and November 1 no covered entity may have a 15 total exposure, as reported by the covered entity 16 for the previous reporting period, equal to or 17 greater than 3 percent of the most recent esti- 18 mate for annual gross domestic product of the 19 United States (in current dollars) for the pre- 20 vious calendar year. 21 (2) RESTRUCTURING.— 22 (A) IN GENERAL.— 23 (i) DESIGNATION.—Any covered enti- 24 ty that violates paragraph (1) shall imme- 25 diately be designated as a ‘‘Too Big to SIL18A91 S.L.C. 4 1 Exist Institution’’ by the Financial Sta- 2 bility Oversight Council. 3 (ii) SUPERVISION.—The Vice Chair 4 for Supervision of the Board of Governors 5 of the Federal Reserve System, or during 6 any period in which that position is vacant, 7 the Chair of the Board of Governors of the 8 Federal Reserve System, shall require and 9 supervise a ‘‘Too Big to Exist Institution’’ 10 to restructure to comply with paragraph 11 (1) not later than 2 years after the date on 12 which the first violation arises. 13 (B) SUBSEQUENT REQUIREMENTS.—After 14 the date on which a covered entity is required 15 to restructure under subparagraph (A), the 16 Vice Chair for Supervision of the Board of Gov- 17 ernors of the Federal Reserve System or, dur- 18 ing any period in which that position is vacant, 19 the Chair of the Board of Governors of the 20 Federal Reserve System, shall require and su- 21 pervise any ‘‘Too Big to Exist Institution’’ to 22 restructure to comply with paragraph (1) not 23 later than 1 year after the institution is again 24 found to be in excess of the threshold specified 25 in paragraph (1). SIL18A91 S.L.C. 5 1 2 (c) PROHIBITION AGAINST USE SERVE OF FEDERAL RE- FINANCING.—Notwithstanding any other provision 3 of law (including regulations), any ‘‘Too Big to Exist In4 stitution’’ may not use or otherwise have access to ad5 vances from any Federal Reserve credit facility, the Fed6 eral Reserve discount window, or any other program or 7 facility made available under the Federal Reserve Act (12 8 U.S.C. 221 et seq.), including any asset purchases, tem9 porary or bridge loans, government investments in debt 10 or equity, or capital injections from any Federal institu11 tion. 12 (d) PROHIBITION 13 (1) IN ON USE OF INSURED GENERAL.—Any DEPOSITS.— ‘‘Too Big to Exist In- 14 stitution’’ that is an insured depository institution, 15 or owns such an institution, may not use any in- 16 sured deposit amounts to fund— 17 (A) any activity relating to hedging that is 18 not directly related to commercial banking ac- 19 tivity at the insured bank; 20 21 22 23 (B) any creation or use of derivatives for speculative purposes; (C) any activity related to the dealing of derivatives; 24 (D) any creation of, or lending against, 25 new or existing forms of structured or struc- SIL18A91 S.L.C. 6 1 tured 2 collateralized debt obligations, collateralized 3 loan obligations, and synthetic derivatives of 4 collateralized debt obligations and collateralized 5 loan obligations; or 6 derivatives that regulators specify. 8 (2) RISK 10 including (E) any other form of speculative activity 7 9 products, OF LOSS.—A ‘‘Too Big to Exist Insti- tution’’ may not conduct any activity listed in paragraph (1) in such a manner that— 11 (A) puts insured deposits at risk; or 12 (B) creates a risk of loss to the Deposit 13 14 Insurance Fund. (e) REPORT; TESTIMONY.—The Vice Chair for Su- 15 pervision of the Board of Governors of the Federal Re16 serve System, or during any period in which that position 17 is vacant, the Chair of the Board of Governors of the Fed18 eral Reserve System, and the Chair of the Financial Sta19 bility Oversight Council shall annually testify before the 20 Committee on Banking, Housing, and Urban Affairs of 21 the Senate and the Committee on Financial Services of 22 the House of Representatives and submit to those commit23 tees an annual report the restructuring and designation 24 under subsection (b)(2). SIL18A91 S.L.C. 7 1 (f) EFFECTIVE DATE.—Subsections (c) and (d) shall 2 apply to a covered entity 90 days after the date on which 3 a covered entity is designated as a ‘‘Too Big to Exist Insti4 tution’’.