The Congressional Oversight Panel (COP) held its final hearing today with a number of regulators and academics focused on the legacy of the TARP. A panel of academics was highly critical not only of TARP, but also of the Dodd-Frank Act. They called for far higher capital and other sanctions on large firms, based in part on a consensus that nothing in the new law successfully addresses “too big to fail.” Regulatory witnesses generally confined themselves to TARP-related assessments, but Jason Cave of the FDIC stated that large banks should not be allowed to increase dividends until they demonstrate the ability to support liquidity demands in a prudent way as debt guaranteed by the FDIC terminates in the next year or so. This reflects ongoing discussions with the FRB following last year’s stress test (see FSM Report STRESS5) and may make it still more difficult for the largest bank holding companies to resume capital distributions. This report analyzes today’s session.
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