‘RISKY’ BANK REGS
Wall St. warns pols
Top Wall Street bosses warned lawmakers that financial rules that regulators are considering could hurt lending and potentially damage the American economy.
Bank CEOs, including JPMorgan’s Jamie Dimon and Goldman Sachs’ David Solomon, argued at a congressional hearing on Wednesday that stricter legislation being floated — like increasing the amount of capital banks are required to hold — could create risk and hurt markets.
“Ironically, a proposal to mitigate risk will create even more risk in the financial system,” Dimon said in his opening testimony. It “will fundamentally alter the US economy in ways that the Federal Reserve has not studied or contemplated.”
Solomon added that new global policies — known as Basel III Endgame — have “a particularly negative impact to capital markets functioning.”
While oversight of Wall Street firms happens every year, this year’s meeting comes following a string of regional bank failures earlier this year that resulted in well-known institutions like Silicon Valley Bank and Signature Bank going belly-up.
JPMorgan stepped in to buy First Republic Bank after the smaller bank collapsed.
In response, new global banking standards have been proposed in the hopes of providing more stability to the sector.
Side effects
But the CEOs stressed the potential harm to a range of products and services, from green lending, commodities hedging and pension plan profits, to US Treasury market liquidity.
Morgan Stanley’s James Gorman emphatically criticized Basel as “wholly unnecessary” and later making “no sense” for an industry already awash in cash and subject to a slew of strict regulations.
The CEOs were grilled by lawmakers including progressive Sen. Elizabeth Warren (D-Mass.).
Democrats like Senate Banking Committee Chairman Sherrod Brown (D-Ohio) voiced skepticism that banks are motivated by more than profits.
“Absolutely nothing in these rules would stop your banks from making loans to working families,” he said. “What your banks want is to maximize quarterly profits, the cost of everything and everyone else be damned.”