The Federal Reserve is set to re-propose long-delayed rules for limiting business ties between Wall Street firms such as JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc., aiming to ensure megabanks won’t take others with them if they fail, Bloomberg News reported today. The measure to be voted on at a meeting in Washington, D.C., today represents a second try after Fed governors abandoned a 2011 proposal to restrict banks’ credit exposure to any other financial firm to 10 percent of capital. That original proposal, much tougher than a 25 percent restriction called for in the 2010 Dodd-Frank Act, was shelved after receiving strong criticism from the banking industry. Congress included the safeguard in the landmark regulatory law after financial firms that fell during the 2008 credit crisis threatened to pull their trading partners toward collapse. In the most infamous instance, Wall Street banks with credit exposure to Lehman Brothers Holdings Inc. got taxpayer-funded aid to help them weather that firm’s bankruptcy.
