The Senate Banking Financial Institutions and Consumer Protection Subcommittee convened a hearing today on whether too-big-to-fail (TBTF) has been made moot by the orderly-liquidation authority and regulatory sanctions in the Dodd-Frank Act.  Former FRB Chairman Paul Volcker suggested that the Dodd-Frank framework should suffice.  Mr. Volcker also took his usual tough stand on his eponymous rule, arguing that large banks should already have in place reporting systems that permit ready identification of banned proprietary trading (rejecting suggestions that nothing need happen until the end of the Volcker conformance period).  FDIC Acting Vice Chairman Thomas Hoenig – speaking for the first time in this new role argued for a prohibition on “high-risk activities” within banks (saying ring-fencing and prohibitions are better than size caps) and for tough MMF regulation.  Subcommittee Chairman Brown (D-OH) proposed an alternative, announcing that earlier in the day he introduced legislation to impose strict size and leverage limits on the largest financial institutions. The SAFE Banking Act of 2012 is based on legislation introduced in 2010 and is not likely to pass this time around.  This client report assesses today’s hearing.

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