National attention to proposed increases in capital requirements for banks continues to grow as more stakeholders warn of the plan's negative consequences on American businesses, homebuyers, and consumers.
Below is what people are saying:
Rep. Jim Himes (D-CT) argued that banking regulators are not clear on the need for extensive capital increases: "You're sensing and hearing a lot of confusion on the part of members around the proposed rule (...) We're in a world of confusion here. We saw a governor's vote that was split. We heard the chairman himself elucidate some very serious concerns. The first line of your testimony today was that our banking system is sound and resilient. So a lot of us are struggling to see the clear need for additional capital." (Financial Services Committee, 11/15/2023)
Sen. John Tester (D-MT) noted that the proposed changes would negatively impact credit available to small businesses in Montana:"Look, I'm concerned about small businesses. Because Montana's a small business state. They have to have access to capital… I have some concerns about the proposed changes, and what its impact will be on workers and households, small businesses, access to credit, and the overall vibrancy of our capital markets…. From a small business standpoint, if this rule doesn't work, it's gonna raise hell with the economy of my state." (Senate Committee on Banking, Housing, and Urban Affairs, 11/14/2023)
Rep. David Scott (D-GA) expressed fears that the proposed changes to capital requirements would increase costs for American consumers and businesses: "Ifear that making these hedges more costly for all of these major industries, airlines, the manufacturers, as I mentioned, will only make the cost of goods and services, food prices at our grocery stores, airline tickets, gasoline at our stations; our everyday American households more expensive." (Financial Services Committee, 11/15/2023)
Sen. Mark Warner (D-VA) highlighted concerns that this proposal might lead to the "perfect storm": "I do feel like this could be the moment of a perfect storm where you've got the challenges around rising interest rates, you've got quantitative tightening, you have the challenge that I've been concerned about for some time is that this may actually result in pushing more lending outside the regulatory perimeter. Later on top of that, we've got a lot of geopolitical risks. And I do think, and I appreciate what you've both said to me, that you are going to look very carefully at the comments. I worry a little bit about the schedule, that the comments may not come in, until after the rule gets close to finalization. And again, I really wanna make sure that you are listening to legitimate concerns." (Senate Committee on Banking, Housing, and Urban Affairs, 11/14/2023)
Rep. Ann Wagner (R-MO) warned of the proposal's negative effects on the U.S. economy as a whole: "These increases will negatively impact US bank's ability to conduct critical market making activities, harming further the US economy. (...) You know, access to credit or loans essentially is a key driver of the innovative and competitive nature of the American economy. Credit helps start businesses. It allows them to grow and it, and to invest in anything from new equipment, facilities, technology, it helps create jobs that would not have existed otherwise." (Financial Services Committee, 11/15/2023)
Sen. Van Hollen (D-MD) brought attention to the proposal's impacts on the clean energy transition: "I have concerns with certain aspects of the Basel III regulations as they relate to potentially being a drag on the deployment of clean energy. Last month, the three banking oversight agencies represented here issued joint principles with respect to climate risks and the transition, from a fully fossil fuel economy to a clean energy economy. And of course, one of the devices we use to try to accelerate and manage that transition has been clean energy tax credits, so I have been concerned with the treatment of those tax credits in the most recent Basel III discussions." (Senate Committee on Banking, Housing, and Urban Affairs, 11/14/2023)
Rep. Sean Casten (D-IL) also expressed concerns about the proposal's effects on clean energy investments: "The proposed rule would quadruple the capital requirements for banks that make tax equity investments. I'm particularly concerned about that as it may frustrate the intent of the Inflation Reduction Act since the clean energy provisions were led so heavily on tax credits. (...) Last thing I wanna raise in the little time we've got left. In talking with clean energy developers and talking with banks, we are hearing that banks are already starting to slow down their investments in the clean energy space because they are anxious about the potential need to build capital reserves." (Financial Services Committee, 11/15/2023)
Rep. Gregory Meeks (D-NY) questioned the proposal's negative impacts on first-time and low-income homebuyers: "I just wanna just say it's absolutely key and essential. You know, there's so many individuals, low and moderate income families with great credit ratings. They just can't afford the 20% down payment. And to deny them that is to deny them the American dream and the access to create wealth, because for most people that home is the greatest investment that they will make and it is something that helps reduce the income gaps and helps wealth. So I would hope that we make sure that you take every consideration as you look at the proposal to make sure that's included and not and not bypassed and not looked at because it's absolutely key for many Americans." (Financial Services Committee, 11/15/2023)
Sen. Steve Daines (R-MT) pressed regulators on the proposal's direct impact on businesses in Montana: "This proposal will limit credit availability to small businesses. I’m hearing it in both ears from our businesses back home across Montana. We had four Montana small business owners in the office this morning who flew in to express their frustration with this legislation. Look, we’re from a state that is a small business state, we are not the land of massive c-corps, we’re the land of small businesses." (Senate Committee on Banking, Housing, and Urban Affairs, 11/14/2023)
Sen. Katie Britt (R-AL) argued that the proposal undermines the strength and resilience of the American banking system: "So, for the record, all of you believe the U.S. banking sector is strong. Yet, over the last several months, we’ve seen a wholesale attempt to fundamentally alter our banking system. Not only do your agencies’ recent proposed rules undermine the proven strength of our banking sector, but they risk making it weaker, and it is Main Street America that will ultimately be punished. I have spoken directly with dozens of banks and credit unions of all sizes. It is clear that your proposed rules are so wide-reaching that they leave no financial institution untouched." (Senate Committee on Banking, Housing, and Urban Affairs, 11/14/2023)
Rep. Brad Sherman (D-CA) noted that the plan has direct impacts on the environment, the mortgage market, and small businesses: "You've worked hard on these regulations, but as I'll point out to you, they discriminate against the environment. They discriminate against home first time home buyers and they discriminate against small business." (Financial Services Committee, 11/15/2023)
Hollies Winter, mayor of Brooklyn Park, MN, warned of the proposal's negative unintended consequences on businesses and homebuyers: "Owning your own home or starting your own business has always been a part of the American dream, and everyone deserves access to those opportunities. That’s why I was troubled to hear about a well-intentioned, yet misguided, proposal being considered by the Federal Reserve, which seeks to raise capital requirements for banks. I respect the proposal’s sentiment, but its focus is misplaced, and its unintended consequences would worsen the problems that aspiring homeowners or hard-working entrepreneurs already face, especially those in communities of color." (Minnesota Spokesman-Reporter, 11/9/2023)
Jim Smith, former mayor of Helena, MT, expressed concerns that the proposal could have drastic effects on Montana's small businesses, farmers, and ranches: "It is important that the full board of governors reconsider the impact of this rule on farmers and ranchers. Many are already struggling under increased costs for fuel, electricity, seeds, feed, and labor. While the Federal Reserve gets some credit for fighting inflation without putting the economy into a recession, all that work could be undone by a rule that could put credit out-of-reach for many small businesses, including the 21,000 farms and ranches here in Montana." (Daily Montanan, 11/20/2023)
Rep. Francesca Hong, from the Wisconsin State Assembly, argued that increases in bank capital regulations would hurt small businesses: "It’s essential that we rebound by creating a financial environment that allows small businesses to thrive here in Wisconsin and across the country. Unfortunately, a proposal from the Federal Reserve aimed at increasing capital requirements for banks would do the opposite—ushering in regulations that would make it harder for small businesses to grow, especially minority-owned small businesses that bore the brunt of the pandemic’s impact." (Wisconsin State Journal, 11/4/2023)
The U.S. Chamber Coalitionurged federal regulators to reconsider the rule, arguing that it would make the U.S. economic environment worse for Americans: "Businesses will be confronted with either higher costs or fewer options in nearly every product and service they access from affected banks. For example, small business loans will be more expensive given the proposed rule requires banks to hold more capital against credit exposures from companies that are not publicly listed. The housing sector could be stifled due to restrictions in mortgage credit. Loans to companies and households for renewable energy investments will be more expensive because the proposal disfavors certain tax credit programs like provided in the Inflation Reduction Act." (U.S. Chamber of Commerce, 11/14/2023)
Bloomberg Opinion editors argued that the proposal does not adequately address capital risks: "The proposal also raises the amount of capital needed to fund mortgages, especially in cases where the loan is for more than 80% of the home’s value. The logic is clear—banks are at greater risk of taking losses on such loans. But the higher capital charge could lead them to pull back on lending to low- and moderate-income borrowers, including people of color. That would contravene the regulators’ stated purpose. (...) These are just a few of the complications that arise when regulators try to micromanage banks’ balance sheets. More are likely to be revealed. The truth is that no risk-weighting is perfect; the relative risk of assets changes by the hour." (Bloomberg Opinion, 11/20/2023)
These comments add to a growing number of local and national voices urging Washington to recognize that Americans can't afford increases in bank capital requirements.