Battle expected over
new capital rules
for financial firms
Commercial banks spent a whopping $60 million on lobbying last year, and a battle is brewing over new financial regulations. Click image to enlarge.
Although they almost brought the economy to its knees in 2008, reckless banking giants have managed to thwart every effort to tighten regulations on their gambling.
Despite the best intentions of the Dodd-Frank reform effort, regulators watered down the law until it was almost meaningless – testament to the power of the banking lobby,
Now that seems about to change.
Action alert below the fold
- The three biggest banks contributed almost $4 million to lobbying efforts for the industry last year.
In the Sunday national edition of The New York Times, Gretchen Morgenson – one of the most astute business writers in the country – gives us reason for optimism.
In Bankers Are Balking at a Proposed Rule on Capital she reports on a “a potent new weapon against too-big-to-fail banks” in the form of tight new capital requirements with no wiggle room.
“If the rule goes into effect, it will require the nation’s largest banks … to double the amount of capital they have on hand to cover losses,” Morgenson writes.
But hold your applause.
According to OpenSecrets, the commercial banks spent about $60 million on lobbying in 2012 alone, about the same as the year before.
Wells Fargo, Citigroup and Chase alone accounted for $3.9 million of this.
They are not going to give up without a fight.
“Naturally, the financial sector hates it,” Morgenson writes.
She is backed up by a July 9 press release from The Financial Services Roundtable which claims the New Leverage Ratio Proposal Will Hurt Economic Recovery.
“…[T]his new proposal, combined with existing capital
and leverage requirements, will make it harder for banks to lend and keep the economic recovery going,” said Tim Pawlenty, President of FSR.
“This new heightened requirement would only impact U.S. institutions, resulting in American banks being put at a global competitive disadvantage.”
What a tired old saw. They trot it out every time the regulators start to get serious.
The FSR represents 100 of the largest integrated financial services companies, it claims. Member companies participate through the CEO ….
Which reminds me of the column Morgenson wrote a couple of weeks ago and which I blogged here: CEO gross income explodes while poverty rises.
CEOs at the top companies got a 16 percent pay increase last year, while the rest of us got virtually nothing.
So expect a battle royal over the new capital requirements.
Just last year, Martin Gruenberg replaced the tough and smart Sheil Bair as head of the Federal Deposit Insurance Corp.
New FDIC Chairman Martin Greunberg.
The FDIC was joined by the Federal Reserve Board and the Office of the Comptroller of the Currency (OCC) on July 9 in proposing the rule “to strengthen the leverage ratio standards for the largest, most systemically significant U.S. banking organizations,” according to the FDIC press release.
“The proposed rule would currently apply to the eight largest, most systemically significant U.S. banking organizations,” it says.
If Gruenberg is half as tough as his predecessor Bair, there may by some hope that the new rule will survive the regulatory battle looming.
So little has been done to improve the soundness of giant banks, that another financial crisis is almost inevitable.
Morgenson writes that regulators will receive and weigh public comments about their proposal over the next two months.
“You can be sure that, from now to then, the nation’s largest banks will do whatever they can to weaken it.”
Let’s all hope they fail.
YOU CAN DO SOMETHING ABOUT IT, however. Contact the FDIC at this link and tell them not to cave to the banking industry: Support the new banking rules. Click here.
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