Capito, Fellow Committee Leaders Announce Comprehensive Financial Regulatory Reform Plan

Press Release

Rep. Shelley Moore Capito, R-W.Va., today joined with Ranking Member Spencer Bachus, R-Al., and other senior Republicans on the House Financial Services Committee to unveil a comprehensive plan to update and modernize the regulatory structure for the financial services industry. Their plan focused on holding Wall Street accountable for their actions while ending the practice of extensive government bailouts for firms deemed "too big to fail."

"My constituents and I are very uncomfortable with the idea that our tax-dollars were going to bailing out large financial institutions," said Capito. "Thankfully this proposal draws a line in the sand when it comes to bailouts, while protecting taxpayers and creating a renewed sense of stability and certainty in the financial markets that can serve as a sound foundation for growth and market security. We can't afford to reward failure and we need transparency and accountability, not the government picking winners and losers."

Capito and her colleagues outlined three central principles: no more bailouts; getting the government out of picking winners and losers in the marketplace; and restoring market discipline to eliminate the expectation of a government rescue.

Ranking Member Bachus, R-Al., said, "The plan we are announcing today brings a new era of responsibility to Wall Street. No longer will financial firms be able to hand their losses off to the taxpayer. Restoring market discipline and getting the government out of the bailout business is critical to helping prevent another crisis. Our plan also brings needed reforms to the Federal Reserve to ensure transparency and accountability, and to protect taxpayers who have been forced to pay for Wall Street's mistakes during this crisis."

The plan announced today would end all bailouts and direct all insolvent non-banks to an enhanced bankruptcy process, creating a new chapter of the bankruptcy code to deal with these institutions. The creation of a new chapter in the bankruptcy code will ensure that bankruptcy is efficient at handling non-bank financial institutions and that appropriate regulatory expertise is available to the bankruptcy court when dealing with these failures. Special classes of bankruptcy already exist for railroads, municipalities and farmers.

To fundamentally reform the Federal Reserve, the plan relieves the Fed of its current supervisory duties so that it can refocus on its core mission of conducting monetary policy. To promote accountability and transparency, the Government Accountability Office will conduct audits of the Federal Reserve. The Fed would also be prohibited from using its authority under section 13(3) of the Federal Reserve Act to bail out any specific financial institution. Its remaining section 13 (3) authority would be limited by requiring Treasury approval of -- and giving Congress the ability to disapprove - any action under 13(3). All transactions carried out pursuant to section 13(3) would be brought onto Treasury's balance sheet.

"These proposals get the government out of the bailout business, prevent it from cherry-picking winners and losers, and send a clear signal that from now on, Wall Street -- not taxpayers -- will be responsible for risky business," said Rep. Judy Biggert, R-Ill. "Our proposals put taxpayers first. They point toward smarter, stronger regulators and regulations that promote transparency, accountability, and competition."

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