S&C’s Cohen: Brown-Vitter Punishes Banks For Being Big
May 3 (Bloomberg Law) — Rodge Cohen, partner at Sullivan & Cromwell who represents the nation’s largest banks, talks with Bloomberg Law’s Lee Pacchia about the concept of Too Big To Fail and a recent proposal from Senators Sherrod Brown and David Vitter to regulate the banking industry.
Cohen feels that the regulatory reforms in Dodd-Frank make it very difficult for the federal government to be forced into bailing out a troubled bank in order to prevent widespread economic harm. “Dodd-Franks’s mandates are very specific and very clear; shareholders are wiped out, management is replaced, debt holders suffer any losses and taxpayers are fully protected,” he says. In addition, he feels there is an effective regime within the law for resolving troubled banks without systemic consequences.
Cohen acknowledges that there can be a situation where a bank is simply so big that its existence threatens the national interest, pointing to Europe where he says several countries have banks that outweigh their entire GDP. “The major banks in the United States are far below the percentage of GDP which they are in virtually every other country,” he says.
Cohen notes that the proposals put forth in the Brown-Vitter bill do not improve the financial regulatory scheme in the United States. The capital requirements “are just too high to make any meaningful return on equity.” Moreover, Cohen feels the proposal simply punishes banks for their size alone, setting an unwise precedent for other industries.