Responsible Banking Act of 2010

Excessive use of financial leverage contributed to the ongoing U.S. financial and economic crisis.

The largest U.S. banks remain severely undercapitalized.

U.S. banks have failed to recognize losses from imprudent investments, particularly in assets linked to home mortgages and commercial real estate, and the resulting economic uncertainty and household indebtedness are major impediments to U.S. economic recovery.

Multiple large public subsidies have been extended to the financial services industry in the form of cost-free access to capital, low-cost Federal loans and guarantees, Federal purchases of troubled assets, and other exceptional actions taken and policies put in place since January 2008.

These public subsidies represent an extraordinary benefit to all industry participants in the financial marketplace, regardless of whether they have received direct Federal assistance.

A short-term focus on compensation has encouraged banking decision-makers to underestimate business risks, has undermined effective corporate risk management, and has thereby contributed to excessive systemic risk.

Existing regulatory rules and institutions have proven inadequate to protect the American people from ineffective and imprudent risk management.

The flow of credit to small and medium-sized businesses and to households continues to contract, impeding overall economic recovery.

Enhanced capital adequacy is urgently needed to restore the health of the U.S. banking system.

The use of profits to pay bonuses rather than recapitalize financial institutions delays recovery of financial institutions and impedes recovery in the real economy.