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WASHINGTON, D.C. – Reportedly, the U.S. Federal Reserve plans to “massively scale back a proposal to raise capital requirements for banks after politicians and the banking industry pushed back on the initial plan,” marking a “major reversal following the string of regional bank failures last year that was touched off by Silicon Valley Bank.” Government watchdog Accountable.US called the Fed’s move a white flag to the financial industry that compromises the stability of the financial system and threatens the economy. 

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When the Fed proposed reasonable new safeguards after the mid-sized banking collapse of 2023, the loudest critics were the same big Wall Street banks that brought down the economy in 2008 while securing a massive taxpayer-funded bailout. Unfortunately, the Fed has now rolled over for banking lobbyists that insist on as little oversight and accountability as possible. The Fed should reconsider their capital requirements rollback because history shows big banks choose greed over the stability of the financial system when laxer regulation presents the opportunity. If MAGA lawmakers hadn’t watered down financial regulations in 2018, the now-shuttered banks like SVB wouldn’t have been able to take huge risks they couldn’t afford to lose.”

Accountable.US’ Liz Zelnick

WHAT YOU NEED TO KNOW: 

  • The financial crisis of 2008 that cratered the economy, cost millions of jobs and wiped-out trillions in retirement savings was the result of reckless behavior by big banks that treated the subprime housing market like a casino. When the housing bubble burst and the Wall Street casino went bust, the big banks were the first in line for a $700 billion taxpayer bailout. Yet many of the same bailed out banks — including JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, Morgan Stanley, BNY Mellon and State Street — launched a 7-figure ad campaign last year against commonsense proposed federal rules to help prevent another financial crisis. The industry cried foul over new limits to risky market behavior beyond their means by increasing minimum capital requirements for banks with at least $100 billion in assets.
  • The Fed’s reversal this week also follows criticism from Republican members of the House Financial Services Committee that have taken at least $77,500 in contributions from industry groups opposed to the enhanced capital requirements.
  • Accountable.US has documented how S. 2155 – the 2018 Republican-led, financial industry-pushed, Trump-signed law that gutted Dodd-Frank’s risk-assessment safeguards for midsize banks — gave a key Trump-appointed regulator, Federal Reserve Vice Chair Randal Quarles, all the “discretion” the former banker needed to drive “an overall cultural and practical shift in which banks expected, and got, more lax treatment from their supervisors,” paving the way for banks like Signature Bank, Silicon Valley Bank (SVB) and First Republic Bank to gamble beyond their means without fear of real federal consequences.

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