Sen. Elizabeth Warren, D-Mass., is accusing Federal Reserve Chairman Jerome Powell of doing the financial industry’s bidding as he considers changes to a broad set of rules aimed at increasing the capital cushion that big U.S. banks would be required to maintain.
June 17 letter First obtained by CNBC, Warren asked Powell to respond to reports that “you favor cutting in half” the capital increase required under the proposals known as the “Basel III Endgame.”
“I am disappointed by reports in the press that you are personally intervening – after numerous meetings with the heads of large banks – to delay and relax Basel III capital rules,” Warren said.
Last year, three U.S. banking regulators, including the Federal Reserve, unveiled proposed rules representing a long-awaited regime change for bank capital and risky activities such as trading and lending. The rules incorporate 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 and as risks associated with a weak commercial real estate market and other economic threats spread through the banking system,” Warren said.
Bank executives and their lobbying groups said the hikes are unjustifiably aggressive and will force the industry to cut lending.
Powell told lawmakers in March that he expected “broad and significant changes” to the proposal following an industry campaign against the rules. JP Morgan Chase CEO Jamie Dimon coordinated efforts to loosen the rules, urging executives to approach Powell directly. The Wall Street Journal reported this last month..
“It now appears that you are directly doing the bidding of the banking industry, rewarding them for actively lobbying you personally,” Warren said in her letter. “Taking orders from the industry that caused the 2008 economic crisis will sacrifice the financial security of the middle class and working families to line the pockets of wealthy investors and executives.”
She also criticized Powell, saying the “regulatory rollback” under the Fed chairman allowed the 2023 regional banking crisis to happen and “riched Jamie Dimon and his Wall Street friends.”
Warren called on Powell to allow the Federal Reserve Board to vote on Basel’s initial, tougher proposal by the end of this month. The window to finalize and approve the rules before the US election in November is closing, and analysts say the proposal could be delayed or scrapped if Donald Trump is re-elected president.
“Instead of following Mr. Dimon’s orders, you should do your job and allow the Board of Directors to meet to vote on a 16% capital increase by June 30, as global regulators have deemed necessary to prevent another financial crisis,” he said. Warren.
When asked to respond to Warren’s letter, a Fed spokesman issued the following statement Tuesday morning: “We have received the letter and plan to respond.”