Coming out of Federal Reserve Chair Powell's semiannual Monetary Policy Report testimony to Congress, it is clear that broad and detailed public opposition to Basel III Endgame is having an impact. In the face of mounting concerns, Chair Powell affirmed that we should expect "broad, material changes" to prevent unintended consequences from the proposal.
Don't take our word for it. Check out the media coverage of Chair Powell's testimony:
- New York Times: Jay Powell Signals a Retreat on Banking Rules
- POLITICO: Powell leaves door open to reissuing bank capital proposal
- Reuters: US regulators expected to significantly reduce Basel capital burden
- American Banker: Powell eyes ‘broad,’ ‘material’ changes to capital requirements proposal
Here are the highlights from Chair Powell's testimony:
Representative Andy Barr (R-KY) asked Powell if he was concerned that 97% of the comments on the proposal were negative:
POWELL: I would say it’s unlike anything I’ve seen.
Representative Steven Horsford (D-NV) asked Powell about the negative effects Basel III Endgame will have on mortgage lending and housing affordability, specifically for minority borrowers who disproportionately rely on high-LTV mortgages:
POWELL: We've received comments including many on the mortgage changes. We understand the concerns and, you know, we’re looking very carefully at that.
Representative Ritchie Torres (D-NY) asked Powell about Basel III Endgame's impact on pushing financial services into the non-bank sector:
POWELL: That is clearly a risk. We’ve seen intermediation activity moving out of the regulated system and this has the risk of doing more of that.
Representative Ann Wagner (R-MO) asked about the dissent among regulators on Basel III Endgame:
POWELL: We're working our way through the comments and we're coming to the point where it'll be appropriate for us to begin to evaluate what changes are appropriate. I've said, I think those changes will be broad and material.
Representative Patrick McHenry (R-NC) asked if the proposal will have significant changes:
POWELL: I'm confident that the final product will be one that does have broad support both at the Fed and in the broader world. As far as the process is concerned, we're really not at the stage of making decisions about that. That's down the road at least a bit. I will say the question we get is, re-proposal, and I will say that we haven't made that decision, but if when we get to that point that turns out to be the appropriate thing, we won't hesitate to do it.
Regulators must take the next step: scrap Basel III Endgame and start over.