Something I have come to know and accept about myself is that I am not cut out for haggling. Whenever I go to buy a car or a mattress or something off of Facebook Marketplace — any situation where haggling is either expected or acceptable — I go into the sale dreading the conflict, and specifically resenting my presumed role as a capable advocate for my own interests. As often as not I just say OK to whatever the initial asking price may be, and as often as not I come away from those transactions feeling like I could have gotten a better deal.
Not everyone has this same disposition, and it seems that Consumer Financial Protection Bureau Director Rohit Chopra is someone who comes out of the mattress store with an extended warranty and a couple hundred more dollars in his pocket than I do. That passion for the conflict that I so evidently lack is now on full display after
Chopra is not on the record explaining his position, so I can't speak with authority about why he's holding up the deal or what he wants in exchange for his support. But what we do know is that the revised proposal concedes some important points to the banking industry, including cutting the top-line capital raise requirements for the largest banks, proposing a new rule rather than finalizing the initial proposal and adjusting the treatment of risks related to credit, trading and derivatives, tax credit equity financing and operational risk. If the original proposal was an opening bid and the industry's opposition as a counteroffer, the re-proposal described by Federal Reserve Vice Chair for Supervision Michael Barr would represent a middle ground that concerned parties may not love but that most can live with.
But the buyer's leverage in this or any negotiation is the power to walk away — I can sleep another night on my old mattress, but you may not be able to go another day without a sale, and so if you want me to buy this one now you have to make it worth my while — and that's what Chopra is doing here. In doing so, Chopra is accomplishing a couple of things, not all of which may be intended.
The first accomplishment is that his move relegates the Basel re-proposal as described by Barr to being another counteroffer in an ongoing negotiation rather than the final product of those talks. That is embarrassing to Barr, whose rollout of the initial proposal
Contradicting Barr when he said the FDIC was already on board could be a feature or a bug in Chopra's stand against the re-proposal, but either way it pushes Barr into the unenviable and possibly impossible position of having to find common ground between Chopra on the one side and the holdouts on the Federal Reserve Board on the other. The only other option would be to have the Fed move on its proposal without the other regulators, but Federal Reserve Chair Jerome Powell effectively cut off that exit after last week's Federal Open Market Committee meeting by saying regulators
The other thing that stalling the Basel re-proposal does is effectively table the discussion until after November's elections, when Chopra and everyone else concerned will have a better handle on who will be at the table for the next four years and thus a better sense of what concessions he might be able to wring from them.
That knife cuts both ways — if Republican presidential nominee Donald Trump wins in November, that negotiating table
But that isn't really a problem, because the Basel re-proposal almost certainly could not be finalized before inauguration day 2025 even if Chopra had gone along with it. But if your personal brand is based on standing up to the big banks, that image is reinforced by saying no to this re-proposal now, and all it costs is delaying a rule that has been held up
I don't want to impugn Chopra's motivations as purely Machiavellian or political — I have no doubt that it is his sincere belief that bank capital, particularly for the largest banks, is too low. That's an idea that has
But joint interagency rulemakings are not negotiated the same way one negotiates the price of a used car. Regulators have to consider not only the substance of the rules they write but the process by which those rules are written, so even if regulators agree on a regulation unanimously a court can throw it out if they reach the right conclusion the wrong way.
What's more, regulators issue and reissue rules all the time based on evolving priorities or shortcomings that emerge through lived experience; Basel is not the final word on bank capital, and no regulation ever will be. If the stated goal of the Basel rules is to bring the United States in line with international agreements and make the banking system safer, conceding on Basel in exchange for stricter rules on topics like
For those reasons, Chopra's principled stand against the Basel re-proposal may not amount to much. The Barr re-proposal probably represents the most capital-aggressive deal he could get out of a board whose membership is not going to change in a meaningful way until 2026; a motivated Barr could also go around Chopra and negotiate with one of the Republican appointees on the FDIC board, landing a deal even less palatable to Chopra than the one he now rejects. I would suspect that Chopra would concede rather than letting a worse deal get made or putting the proposal on ice until after the next midterm election. Chopra seems to know when to hold 'em — I suspect he also knows when to fold 'em.
