Federal Reserve Chair Jerome Powell is getting a stark warning from top lawmakers as he prepares to testify on Capitol Hill on Tuesday: Back off the big banks.
Federal Reserve Chair Jerome Powell walks off the stage after speaking at the Economic Club of Washington, Tuesday, Feb. 7, 2023, at the Renaissance Hotel in Washington. | Jess Rapfogel/AP PhotoFederal Reserve Chair Jerome Powell is getting a stark warning from top lawmakers as he prepares to testify on Capitol Hill this week: Back off the big banks.
“Nobody is going to miss the point of this letter, which is hammering Jay Powell to testify the way Wall Street’s biggest banks want him to testify, with the suggestion that there will be political consequences if he doesn’t do that,” said Dennis Kelleher, president and CEO of the watchdog group Better Markets.
Barnum’s appearance in Washington was part of a broad lobbying effort by the industry to grab the attention of policymakers. The Bank Policy Institute, the Financial Services Forum and the Securities Industry and Financial Markets Association have been flooding email inboxes for weeks with arguments against raising capital requirements, in addition to closed-door meetings with lawmakers and their staffs. It’s the industry’s top issue in Washington this year.
The issue is returning to the top of banks’ agenda again because U.S. regulators are in the process of finalizing the last piece of the post-2008 capital rules, with a proposal expected by the summer.Fed Vice Chair for Supervision Michael Barr, a Biden-appointed official who is the central bank’s point man on regulation, triggered the banking lobby late last year when he announced plans for a “holistic” review of bank capital.
“It is an internal process,” said Kevin Fromer, who represents executives of the largest U.S. banks as CEO of the Financial Services Forum. “We, as well as the rest of the public, are outside looking in.” Scott, who is seen as a likely 2024 GOP presidential candidate, told Powell with fellow Republicans Friday that it was “incumbent on you” to oversee the capital review launched by Barr. They warned Powell against violating a 2018 law that eased bank regulations. And they echoed points made by the banking industry about the potential impact on borrowing costs, investment and the competitiveness of U.S. markets.It’s unclear where Powell will come down on the issue.
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