Sen. Elizabeth Warren, D-Mass., is accusing Federal Reserve Chairman Jerome Powell of pandering to the financial industry by considering changes to a broad set of regulations aimed at increasing the capital cushion that huge U.S. banks would be required to have.
On June 17 letter first obtained by CNBC Warren asked Powell to respond to reports that he “supports cutting in half” the capital escalate required under the proposal, known as the Basel III endgame.
“I am disappointed by news reports indicating that, after numerous meetings with the CEOs of huge banks, you are personally intervening to delay and relax Basel III capital rules,” Warren said.
Last year, three U.S. banking regulators, including the Federal Reserve, unveiled proposed rules, a long-awaited regime change on bank capital and risky activities such as trading and lending. The regulations take into account fresh international standards created in response to the 2008 global financial crisis.
“These rules are critical and long overdue, especially in the wake of the failures of Silicon Valley and the Signature Bank, as well as the risks from a frail commercial real estate market and other economic threats spreading through the banking system,” Warren said.
Bank presidents and their lobbying groups said the increases were unnecessarily aggressive and would force the industry to limit lending.
In March, Powell told lawmakers he expected “broad and significant changes” to the proposal following an industry campaign against the regulations. JPMorgan Chase CEO Jamie Dimon coordinated efforts to weaken the rules, urging CEOs to go directly to Powell, This was reported last month by the Wall Street Journal..
“You now appear to be directly doing the bidding of the banking industry by rewarding them for their extensive, personal lobbying of you,” Warren said in her letter. “Taking orders from the industry that caused the economic crash of 2008 would sacrifice the financial security of the middle class and working families to line the pockets of wealthy investors and CEOs.”
She then criticized Powell, saying the Fed-led “regulatory rollback” allowed a regional banking crisis in 2023 and “enriched Jamie Dimon and his Wall Street cronies.”
Warren urged Powell to allow the Federal Reserve Board to vote on Basel’s original, tougher proposal by the end of this month. The window to finalize and approve the regulations before the November U.S. elections is closing, and analysts say the proposal could be delayed or invalidated if Donald Trump is re-elected president.
“Instead of following Mr. Dimon’s orders, you should do your job and allow the board to convene by June 30 to vote on a 16% capital escalate because global regulators have deemed it necessary to prevent another financial crisis,” he said Warren.
Asked to respond to Warren’s letter, a Fed spokesman issued the following statement Tuesday morning: “We received the letter and plan to respond.”
