Home » Finance » Sen. Warren Challenges Powell on Bank Regulations

Sen. Warren Challenges Powell on Bank Regulations

Sen. Warren Challenges Powell on Bank Regulations

In a recent move, Sen. Elizabeth Warren has issued a stern warning to Federal Reserve Chair Jerome Powell regarding potential changes to banking regulations. Warren’s concerns center around proposed adjustments to the Basel III Endgame regulations, which aim to enhance the capital reserves that large banks must maintain.

On June 17, Warren sent a letter to Powell expressing her alarm over reports suggesting that he is “advocating for slashing in half” the capital requirements under these proposals. She emphasized her disappointment, stating, “I am disappointed by media reports indicating that you are physically intervening after several meetings with huge bank CEOs to delay and water down the Basel III capital rules.”

The Basel III Endgame rules were introduced last year by three U.S. banking regulators, including the Federal Reserve, as part of an international effort to strengthen financial regulations following the 2008 global financial crisis. These regulations are designed to address risky banking activities such as trading and lending, which have come under scrutiny, especially after the failures of Silicon Valley and Signature Bank.

Warren highlighted the importance of these rules, saying, “These rules are critical and long overdue, particularly in the wake of the Silicon Valley and Signature Bank failures, and as risks from the weak commercial real estate market and other economic threats ripple through the banking system.” She also pointed out that banking executives and lobbying groups argue the increased requirements are too stringent and could hamper lending activities.

Earlier this year, Powell indicated to lawmakers that he anticipated “broad and material changes” to the proposal in response to industry pushback. Reports have surfaced that JPMorgan Chase CEO Jamie Dimon has been leading efforts to weaken the rules, even encouraging other CEOs to appeal directly to Powell.

Warren’s letter further accuses Powell of capitulating to banking industry demands. She wrote, “It now appears that you are directly doing the bank industry’s bidding, rewarding them for their extensive personal lobbying of you. Taking orders from the industry that caused the 2008 economic meltdown would sacrifice the financial security of middle-class and working families to line the pockets of wealthy investors and CEOs.”

Warren also criticized regulatory rollbacks under Powell’s leadership, linking them to the regional banking crisis of 2023 and alleging they have benefited figures like Jamie Dimon. She urged Powell to bring the original Basel proposal to a Federal Reserve Board vote by the end of June, stressing the need to finalize the rules before the upcoming U.S. elections, which could affect their implementation.

“Instead of doing Mr. Dimon’s bidding, you should do your job and allow the Board to convene for a vote on a 16% capital increase by June 30th, as global regulators determined was necessary to prevent another financial crisis,” Warren asserted.

When approached for a comment on Warren’s letter, a Federal Reserve spokesperson stated, “We have received the letter and plan to respond.”