Big Banks $70 Billion Short in Fed Push to Prevent Bailouts
- Final measure requires U.S. lenders to build up long-term debt
- Rule comes as President-elect Trump vows to undo regulations
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Wall Street banks are about $70 billion short in building up funds the Federal Reserve says they’ll need to tap following a collapse, down by almost half from the central bank’s earlier estimates.
The eight biggest U.S. financial firms are required to build cushions of long-term debt that can be transformed into equity in a new company if the old one fails, according to a rule the Fed governors approved Thursday. Stockpiles of capital will also be used to meet the new standard known as total loss-absorbing capacity, or TLAC, which is a vital component of the plan to make giant banks easier to unwind without taxpayer bailouts. In October 2015, the Fed estimated banks had a total shortfall of $120 billion.