The top Democrat Federal Reserve of the Senate Banking Committee is calling to throw a proposed rule for the amount that is allowed to borrow large banks relative to their capital.
In a letter sent to the Vice Chairing of the Fed this week for supervision, Sen Elizabeth Warren (D-Mas.) The plan to loosen the Fed’s leverage ratio rules would reduce banks and weaken the financial system.
The proposal will be “[reduce] Capital is available to lend, protect depositors and prevent megabank failures, ”Warren wrote
He warned against loosening the financial rules after the 2023 collapse of the Silicon Valley Bank due to the interest rate risk, causing gradual failures of the Signature Bank and the First Republic Bank.
Fall gave a tank to the financial system almost and Lines blurred Between public and private sector. The First Republic was granted bail by its unstable rivals under the aegis of the Treasury, which extended a line of credit to banks backstopped by American taxpayers.
The Federal Deposit Insurance Corporation also insured the deposits of the Silicon Valley Bank over a range of $ 250,000, which saves well -heel heels of one of the most prosperous sectors of the economy.
Warren said in his letter that the former Fed Supervision Boss Randle Quarrels were still not owned by their mistakes about the collapse.
“Randle Quarrels … still refuses to take accountability to implement the Deragite agenda contributing to the collapse of Silicon Valley Bank,” he wrote in the letter.
The Fed last month swamped the rules change in their borrowed ratio. Large banks should currently have about 5 percent of the money borrowed by them, while a little small banks have to wear 3 percent.
Fed has argued that 5 percent is highly restrictive and that reduce number will make banks free to buy more bonds.
Due to proposed changes, larger banks will be allowed to engage in low-risk, low-return activities such as US Treasury Market Intermediate, which will support for support of US Treasury Market, “Fed Said in June,
Banks are supporters of change, calling the cuts in their capital “abstract”.
The Bank Policy Institute said, “The total cut in bank capital is abstract.” statement Last week. ,[Bank] Holding companies are expected to take advantage of the current resolution process to deploy capital where it is most needed. ,
The proposed rule change comes in the form of concerns about the size and trajectory of the American public deficit, which is ready to promote $ 3.3 trillion from the new tax-and-cost law of the Republican.
Some unconventional views are broadcast about how to address it, as the Congress is either unable to increase the taxes or spend enough to send it down.
Sen Ted Cruise (R-Texas) recently proposed to get rid of interest payments on reserve, which are placed in the bank Federal Reserve.
Cruise told CNBC in June that banks could save $ 1 trillion from getting rid of interest payments.
Cruz told Bloomberg News last month, “It is more than a trillion dollar, a big dollar in savings.” “Half of this is going to foreign banks, which has no meaning.”
Some experts are openly wondering whether the leverage rule of the fed is called financial suppression, which means to remove the loan with negative actual interest rates.
David Beckworth, a senior research partner at the Mercatus Institute, told Hill last week, “Some said that if they make this change, it is effectively a form of financial suppression as they are expecting more treasures from banks. Or it can be just a more skilled rule,” David Beckworth, “David Beckworth,” David Beckworth, a senior research companion of Mercetus Institute.
Others have kept the situation more seriously.
“If we cannot cut fiscal deficit, and we cannot default the fiscal deficit, and we do not want to default,” Stephen Johnson told The Hill last month, and we do not want to default … So they have received a slow and consistent enhancement of the loan through negative real rates, “
From 2020 to 2022, public debt fell as a GDP stake as high post-pandemic inflation fell 3.6 percent points, even the US was running a huge loss.
In his letter to Fed Vice Chair Boman, Warren also raised the issue with the fact that the main street business is not attending the upcoming conference of the Fed on business capital requirements, while large banks will apply.
He wrote, “JP Morgan, Goldman Sachs, Morgan Stanley, Bank of America, Wales Fargo, and other banks have been depicted on panels, which are for opening capital requirements, which they have been lobbying for a long time,” he wrote.
