If Joe Biden's regulators get their way, then Americans need to prepare for a world with less access to credit.
Earlier this year, the Federal Reserve joined with other Washington banking regulators in proposing to skyrocket capital requirements on American banks. The proposal — known as the
The rule as drafted dramatically increases the amount of funds banks would be required to keep tied up on the sidelines.
To add insult to injury,
Joe Biden's allies claim that only big banks with more than $100 billion in assets would be impacted by the rule change, but the knock-on effects will be felt by the thousands of community banks and credit unions that serve small towns and rural communities across our country.
Not to mention their customers. Increasing capital requirements will force banks to restrict lending across the board. The rule would make it substantially harder for people to afford a mortgage or to secure a small-business loan. It would undermine the ability of working people to save for retirement and build and grow wealth.
The Americans who will be hurt the most are the Americans who are already hurting, like young families and people with bad or too little credit. Good luck to the working single mom trying to get a car loan or the recent grad looking to start a business. The Biden administration has decided that it knows better and that those funds need to stay put at the bank.
The rule also penalizes pension funds and limits their ability to hedge risk. Who does this hurt? Main Street working Americans attempting to save for retirement.
The fireworks that traditionally accompany big bank CEOs' appearances in Congress were absent Wednesday, but instead executives pushed their opposition to the Basel III capital rules and its impact on the economy.
To make matters worse, the proposal puts U.S. banks at a competitive disadvantage with their international peers. European and Asian banks would enjoy lower capital standards than U.S. firms, allowing foreign banks to take market share and profits from U.S. institutions. This is fundamentally unfair and will put American banks at a severe disadvantage.
What is the problem the Fed is trying to solve? Our banking system just sailed through the worst pandemic in a century with no problems. Banks both large and small stepped up to provide vital lending backstops that kept the U.S. economy afloat. These same banks are routinely passing stress tests imposed by the Fed with flying colors. In addition to those hurdles, the banking sector has successfully weathered the Biden economy and the worst inflation in 40 years.
What is the issue that makes the Fed's burdensome new rulemaking necessary? Biden regulators have been unable to answer that basic question.
We all want our banks to be well capitalized, and for Americans' investments to be safe and sound. But America's banking sector today is already well capitalized.
Some have used the failure of Silicon Valley Bank as justification for why higher capital requirements are necessary, but banking experts have testified before Congress that the Fed's rule would have done nothing to prevent SVB's collapse.
A few Fed officials have already admitted the agency's proposed rule is a bad policy.
Bashing the banks has been good politics for centuries. But Joe Biden is playing Russian roulette with the goose that laid the golden egg. A sudden and dramatic increase in capital requirements risks taking capital out of our economy at a time of economic fragility and anxiety. The effects are coming to a community near you.
