This morning in front of the Senate Committee on Banking, Housing, and Urban Affairs, federal banking regulators faced questions and concerns from a bipartisan group of senators on the negative impacts of Washington's proposed capital regulation plan. The committee's Democratic senators argued that the plan would negatively impact small businesses, lower- and middle-income Americans' ability to access loans, and the clean energy transition:
Senator John Tester (D-MT) argued that the proposed changes would negatively impact credit available to small businesses: "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."
Senator Menendez (D-NJ) noted that the proposal will hurt the goal of closing the racial homeownership gap and making housing more affordable to first-time buyers: "The United States is facing a housing crisis, and affordable housing advocates I've heard from are concerned that the new capital requirements proposed by your agencies may make the problem worse. An analysis from the Urban Institute indicates that banks affected by your proposal account for more than half of all mortgage originations. The Urban Institute's analysis further indicates that the proposal will disproportionately increase costs for Black, Hispanic, and low- and moderate- income borrowers. So one effect of this proposed rule seems to be in direct conflict with the goal I and many members of this committee share to close the racial homeownership gap and make housing more affordable for first time home buyers, particularly buyers of color."
Senator Van Hollen (D-MD) argued that the proposal could negatively impact the United States' transition to clean energy: "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."
Senator Mark Warner (D-VA) drew attention to the fact that the current timeline might not allow enough time for comments to be legitimately considered: "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 want to make sure that you are listening to legitimate concerns."
The senators' questions echoed concerns raised by Republican Senators earlier this week and during today’s hearing:
Senator Steve Daines (R-MT) highlighted that the proposal will negatively impact small businesses, leading to increased costs for consumers: "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 here this morning who flew in to express their frustration with this regulation. Look, we're from a state that is a small business state. We are not the land of massive commerce. We're the land of small businesses. In fact, 99% of our businesses are small businesses. I think we have one of the highest percentages of small businesses in the nation. And when they take a hit, they have to pass these increased costs on the consumers or they go under. So they're looking at higher inflation or loss of jobs, which are two very difficult outcomes. I'm happy to have joined nearly 40 Republican Senators, including every Republican Member of this Committee, urging this proposal to be withdrawn. Vice-chair Barr, if banks are required to keep even more money on the sidelines as this proposal requires, that's gonna have a direct impact on business across my state."
The senators' concerns add to the chorus of stakeholders that are saying Americans can't afford Washington's capital regulation plan.