Senator Elizabeth Warren, D-Mass., has accused Federal Reserve Chair Jerome Powell of yielding to the financial industry’s interests by considering reductions to proposed regulations that would increase the capital cushion required for large American banks. In a letter dated June 17, Warren expressed disappointment over reports that Powell is advocating for cutting the proposed capital increases under the Basel III Endgame by half.
Warren’s letter criticized Powell for allegedly intervening to delay and weaken the Basel III capital rules after multiple meetings with big bank CEOs. These rules, proposed last year by three U.S. banking regulators including the Federal Reserve, aim to implement new international standards developed in response to the 2008 global financial crisis. According to Warren, these rules are crucial, especially following the recent failures of Silicon Valley Bank and Signature Bank, and in light of ongoing risks in the commercial real estate market and other economic threats.
Bank CEOs and their lobbying groups have argued that the proposed increases are too aggressive and would force the industry to reduce lending. In March, Powell indicated to lawmakers that significant changes to the proposal were likely following the industry’s campaign against the rules. Notably, JPMorgan Chase CEO Jamie Dimon reportedly coordinated efforts to weaken the regulations, urging other CEOs to appeal directly to Powell.
Warren’s letter accused Powell of acting in the financial industry’s interest and criticized him for what she described as “regulatory rollbacks” that contributed to the regional banking crisis of 2023, benefiting Wall Street executives like Jamie Dimon. She urged Powell to permit a Federal Reserve Board vote on the original, more stringent Basel proposal by the end of June, emphasizing the urgency of finalizing and approving the rules before the U.S. elections in November. Analysts have suggested that if Donald Trump is reelected, the proposal could be delayed or abandoned.
“Instead of doing Mr. Dimon’s bidding, you should do your job and allow the Board to convene for a vote on a 16% capital increase by June 30th, as global regulators determined was necessary to prevent another financial crisis,” Warren stated.
In response to Warren’s letter, a Federal Reserve spokesperson confirmed receipt of the letter and indicated plans to respond.
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