The Senate Banking Subcommittee on Financial Institutions and Consumer Protection held a hearing today to examine the GAO’s November report on government support for bank holding companies (see FSM Report TBTF12).  Chairman Brown (D-OH) – one of the senators who led GAO to undertake this work – pushed for the strengthening of section 23A’s inter-affiliate transaction limits and finalization of the supplementary leverage rule (see FSM Report LEVERAGE).  In addition to a representative from the GAO, a panel of academic witnesses provided estimates on the size of the subsidy and offered several recommendations to address TBTF.  Building on his pending legislation to repeal Title II with a new big-bank resolution scheme (see forthcoming FedFin report), Ranking Member Toomey (R-PA) concentrated on whether Title II exacerbates TBTF and Sen. Merkley (D-OR) asked about cross-border resolutions.  A second GAO report, which will focus on continuing subsidies to BHCs, is expected later this year and could well play a role in year-end budget negotiations.  This report analyzes today’s session and its policy impact.

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