Sen. Elizabeth Warren, D-Mass., is accusing Federal Reserve Chairman Jerome Powell of pandering to the will of the financial industry by considering changes to a sweeping set of regulations aimed at increasing the capital cushion, the large one American banks would have to hold.
In a June 17 letter first obtained by CNBC, Warren asked Powell for a response to reports that “you are advocating for halving” the capital increase required under the proposals, known as Basel III Endgame.
“I am disappointed by press reports indicating that you are personally intervening – after numerous meetings with CEOs of major banks – to delay and weaken the Basel III capital rules,” Warren said.
Last year, three U.S. banking regulators, including the Federal Reserve, unveiled the proposed rules, a long-awaited regime change on bank capital and risky activities such as trading and lending. The regulations take into account new international standards created in response to the 2008 global financial crisis.
“These rules are critical and long overdue, especially in the wake of the Silicon Valley and Signature Bank failures, as well as the impact of the weak commercial real estate market and other economic threats on the banking system,” Warren said.
Bank bosses and their lobby groups said the hikes were unnecessarily aggressive and would force the industry to restrict lending.
In March, Powell told lawmakers he expected “sweeping and significant changes” to the proposal amid the industry’s campaign against the rules. JPMorgan Chase CEO Jamie Dimon coordinated efforts to weaken the rules and urged CEOs to contact Powell directly, the Wall Street Journal reported last month.
“It now appears that you are directly pandering to the wishes of the banking industry and rewarding them for their extensive personal lobbying of you,” Warren said in her letter. “Accepting contracts from the industry that caused the 2008 economic collapse would sacrifice the financial security of middle classes and working families to line the pockets of wealthy investors and CEOs.”
She further criticized Powell, saying that “regulatory backsliding” under the Fed chairmanship enabled the regional banking crisis of 2023 and “enriched Jamie Dimon and his Wall Street cronies.”
Warren called on Powell to allow a Federal Reserve Board vote on the original, stricter Basel proposal by the end of this month. The window for drafting and adopting the rules before the US election in November is closing, and analysts say the proposal could be delayed or fail if Donald Trump is re-elected president.
“Instead of complying with Mr. Dimon’s wishes, you should do your job and allow the board to meet by June 30 for a vote on a 16 percent capital increase, since global regulators have decided that this is necessary to prevent another “To prevent a financial crisis,” said Warren.
When asked for a response to Warren’s letter, a Fed spokesman said Tuesday morning: “We have received the letter and plan to respond.”
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2024-06-18 13:43:04
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