BASEL III ENDGAME:
Increased borrowing costs will put large purchases, such as a car, appliances, or a home, further out of reach for lower- and middle-income Americans that rely on credit to secure high-value, necessary expenditures.
Owning a home will become more difficult for many Americans, especially for first-time buyers and the underserved, as it will become significantly harder to acquire a mortgage. Making homeownership out of reach for many lower- and middle-income Americans will prevent families from building generational wealth, furthering the American wealth gap.
Small and new businesses rely on loans to run their operations, make payroll, and contribute to their local economy. Without reliable access to credit, they become more vulnerable, affecting the hiring of new employees and expansion plans.
Farmers who often use hedging in their operations will also face higher costs and fewer options. Decreasing farmers’ access to credit will make it harder for them to finance their operations, purchase equipment, or invest in their farms. This can cause a ripple effect on an already vulnerable industry—impacting local economies, agricultural suppliers, and food processors.
Americans are already paying more for rent, food, gas, and other everyday necessities. High inflation, increasing interest rates, reduced credit, and the restarting of student loan payments will only increase the tab for Americans seeking a loan to finance their future.
As the NAACP and others have warned Washington: implementing this proposal will undermine and devastate efforts to increase Black and minority homeownership.
The Urban Institute published research stating that the proposed capital regulation levels exceed necessary levels and will impact loans that are popular among first-time buyers, adversely affecting low- and middle-income borrowers and communities, and borrowers of color.
Implementing Washington's capital requirement plan will make it harder to secure a mortgage, especially for minorities and low income borrowers, only worsening the current wealth gap.
The disparity exists between American Hispanics and non-Hispanic individuals, as well. According to the American Banker, data from the 2020 census shows American Hispanics live in households with a median net worth of $52,190, compared with $195,600 for non-Hispanic individuals.
will drive these individuals towards costlier and riskier methods of capital acquisition, such as the shadow banks.
Higher capital requirements prevent banks from having more funding available to lend to consumers, making it harder for consumers to buy houses, cars, or make appliance repairs—all of which will slow the economy at a time when inflation continues to remain high.
A substantial increase in capital requirements could raise annual borrowing costs. This would cost the economy over $100 billion annually and result in more lending by shadow banks.
The Peterson Institute found that raising capital requirements by two percentage points would decrease the U.S. GDP by $1 trillion over 30 years.