The six largest banks are going to have to come up with a cool $120 billion over a new Fed rule.
The biggest banks in America are going to have to pony up $120 billion.
That’s because of a new rule from the Federal Reserve, which requires that the biggest banks — in this case, Goldman Sachs, JPMorgan Chase, Wells Fargo, and three others — have $120 billion on hand to show that they can turn debt into equity without disrupting markets in a bid to prevent another 2007-08 crisis that resulted in a massive recession, according to a Reuters report.
The resulting bailout frenzy from the market collapse received a storm of criticism from the general public, who complained that ordinary citizens were being thrown under the bus during the recession while money was handed over to the banks that supposedly caused the problems in the first place.
The Federal Reserve is hoping to avoid having to bail out banks again should another recession rear its head, and so the agency is proposing a new rule that would require banks to meet a $120 billion shortfall by issuing debt — a more cost-effective proposal than issuing equity. The Feds want to see that the banks have loss-absorbing capacity to prevent major problems.
There have been a series of similar rules aimed at avoiding a potential collapse, and the Fed’s governors approved this most recent rule in a procedural vote, setting it up to be submitted for public comment.
The rule requires that the banks meet some of these stipulations by 2019, and meet all of them by 2022.
Fortunately for these banks, coming up with $120 billion probably won’t be too tough. JPMorgan has a whopping $2 trillion in assets, the largest U.S. bank.