Republican presidential primary candidate Jon Huntsman has unveiled a plan to reduce the size of banks that are considered to be too big to fail.
While other primary candidates have called for a repeal of the Dodd-Frank Act, Huntsman’s plan calls for a shutdown of Fannie Mae and Freddie Mac, reducing bank leverage and repealing Dodd-Frank, according to Blog.American.com.
Huntsman’s campaign team said that targeting too big to fail banks would reduce the risk of government bailouts.
“We need banks that are small and simple enough to fail, not financial public utilities,” the Huntsman campaign team said, Blog.American.com reports. “Hedge funds and private equity funds go out of business all the time when they make big mistakes, to the notice of few, because they are not too big to fail. There is no reason why banks cannot live with the same reality.”
The Huntsman plan calls for setting a cap on bank sizes based on assets as a percentage of the GDP as well as establishing a similar cap on totally borrowing by individual banks relative to the GDP, according to Blog.American.com.
The plan recommends that the United States explore reforms currently being considered by the United Kingdom to make unwinding large financial institutions less risky. It also makes a recommendation to charge banks that exceed a certain percentage of GDP a fee to cover the costs that taxpayers would have to pay in the case of a bailout.