A former Goldman Sachs banker Neel Kashkari who administered the U.S. Treasury Department’s bailout program during the financial crisis that erupted in 2008, has positioned himself as a reformed Wall Street banker who knows best how to fix the problem.
Dodd-Frank advocates have argued that it will prevent future bank bailouts. But the Minneapolis Fed proposal argues there is still a 67 percent chance of one over the next 100 years. Kashkari’s plan would reduce the likelihood of a future financial crisis over the next 100 years to roughly 9 percent, according to the proposal. The increased equity requirement for banks would replace an existing requirement that allows banks to use equity and long-term debt.
Banks subject to the rule will have $250 billion in assets, a group that would include Bank of America Corp, JPMorgan Chase & Co, Wells Fargo & CO and Citigroup, among others. A group of so-called “shadow banks,” with more than $50 billion in assets, like Blackrock Inc would face a tax of at least 1.2 percent on their debt. If the Treasury indicates any of those firms are systemically important, the tax would rise to 2.2 percent.