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FDIC’s Hoenig Gestures Toward Glass-Steagall Again

June 22, 2015 (EIRNS)—Writing in American Banker on June 22, Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig proposed another "approximation" of Glass-Steagall which FDIC could do, but well short of the full effect of restoring Glass-Steagall.

Hoenig proposed to leave Dodd-Frank and related regulations to the biggest and most complex banks, and give broad regulatory relief to banks which a) have no trading assets or liabilities; b) have a total notional value of cleared and uncleared derivatives, combined, of $3 billion or less; and 3) have an equity capital ratio of 10% of assets.

This, he says, would relieve and advantage more than 90% of the 6,400 U.S. commercial banks, including 18 regional banks with assets up to $104 billion. The figure, 6,400, shows how badly

"community" and "regional" banks need Federal support; some 1,800 others have disappeared since the financial crash of 2007-08! Some have failed, most have been sold or taken over by big banks.

"The proposal, says Hoenig, "would not repeal reforms judged necessary to curb the excesses of the most complex banks, that have used the Federal safety net to expand into areas well beyond traditional banking, at a debilitating cost to the American public.

"U.S. banks engaged in core banking activities and operating with reasonable levels of capital should not incur the same regulatory burden as those that do not."