Statement of Bartlett Naylor, Financial Policy Advocate, Public Citizen’s Congress Watch Division
Note: Today, U.S. Sens. David Vitter (R-La.) and Elizabeth Warren (D-Mass.) introduced the Bailout Prevention Act. The legislation provides that any bank bailout loan must carry an interest rate of five percent greater than prevailing Treasury securities of similar duration. Any firm receiving a bailout must demonstrate that its assets are greater than its liabilities.
The Federal Reserve provided major banks tens of trillions of cheap dollars to survive the financial crash of 2008. That’s not only unfair to millions of Americans who lost their jobs, homes and savings after not receiving a zero-interest government bailout. It’s also a moral hazard that simply invites the mega-banks to gamble again.
Co-sponsorship by this interesting duo emphasizes the merits of this simple reform.