Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC) and JP Morgan Chase (NYSE:JPM) Will be Downsized if Liberal Democrats Get Their Way

A group of liberal Democratic senators are seeking to broaden the regulations concerning big banks, as they’ve introduced legislation to limit the size of banks in the United States, of which only Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC) and JP Morgan Chase (NYSE:JPM) would be included.

Citigroup (NYSE:C) has been divesting of some of its assets, evidently allowing them to fall under the parameters proposed by the senators.

Sen. Sherrod Brown (D-Ohio), along with with fellow co-sponsors of the bill – Bob Casey of Pennsylvania,Jeff Merkley of Oregon and Ted Kaufman of Delaware, said this about what was behind it:

“We want limits on the size of banks. The issue is not how to resolve banks that are too big to fail—that needs to be addressed, it needs to be done right whether it’s $50 billion, whether it’s $100 billion, whether it’s other kinds of ways to do the resolution of too big to fail. But the major issue is to keep the banks from getting too large to begin with, both the deposit banks and the non-depository banks.”

Guidelines for banks under the legislation would be to limit the liabilities held by any bank to 2 percent of the GDP or 10 percent of all insured banks deposits in America. As mentioned, at this time the only banks which would be affected by it would be  Bank of America, Wells Fargo and JP Morgan Chase, although the measure would keep other banks from growing that large in the future.

What Brown and the other co-sponsors are hoping for is that the legislation will be added as an amendment to the bill which Chris Dodd will bring to the Senate floor sometime soon.

Assuming it is allowed to go forward and become part of regulation, banks under the guidelines would be given three years to sell assets to meet the parameters of the bill.