PALO ALTO, CA—United States Senator Bill Hagerty (R-TN), a member of the Senate Banking Committee, today joined Senator Tim Scott (R-SC), Ranking Member of the Senate Banking Committee, along with 37 other Senate Republican colleagues, in sending a letter to Federal Reserve (Fed) Chair Jerome Powell, Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg, and Office of the Comptroller of the Currency (OCC) Acting Director Michael Hsu urging them to withdraw the Basel III Endgame proposal. The Senate Banking Committee is set to hear testimony from the financial regulators tomorrow, where Republicans will press the regulators on their many burdensome regulations that fail to consider the downstream impacts on everyday Americans, including the Basel III Endgame proposal.
The Senators argue that the proposal lacks proper analysis or data to justify its merit, will result in costlier and more limited access to credit for Americans, and will negatively impact the U.S. economy. The Senators also highlight the resilience of the well-capitalized U.S. banking system, and the need for changes in regulation to be tailored and based on demonstrable benefits and needs, not pre-determined agendas.
“Ultimately, these large increases in capital have not been shown to be evidentially based as the Federal Reserve, FDIC, and OCC have failed to provide proper analysis or data to justify their merits, particularly around the costs they will impose throughout all sectors of the economy,” the Senators wrote. “In fact, we have heard widespread concerns regarding the negative impacts that Basel III could have not only on affordable housing but on mortgage lending writ large, small business lending, and consumer lending. In addition, it would limit the availability of access to credit cards and home equity lines of credit. Similarly concerning, this proposal will ultimately put U.S. companies at a competitive disadvantage globally and could force U.S. companies to search for access to financial services from financial institutions abroad, rather than those here at home. Moreover, the proposal disproportionately harms companies that are not publicly listed, who happen to be middle market, private entities, and our millions of small businesses across the country. Each of these potential consequences would have major ramifications alone, but taken in totality, they pose significant harm throughout the economy, particularly in the face of current economic headwinds and tightening credit conditions.”
“While we appreciate that the Federal Reserve, FDIC, and OCC have extended the initial comment period and are now conducting a data collection, it is too little, too late,” the Senators continued. “A thorough cost benefit analysis is critical to ensuring that our regulatory regime is based on sound quantitative analysis and should have been conducted well before releasing the Basel III proposal. As with all regulations, the burdens must be justified and should not outweigh the benefits… While we heard for many months from Vice Chair Barr that the Federal Reserve was engaged in a holistic review of capital standards, the results of that review have never been publicly disclosed outside of a speech by the Vice Chair summarizing the results.”
“Any proposed changes to our bank regulatory framework must be based on demonstrable benefits and needs, not pre-determined agendas which will only serve to harm the economy and consumers alike. Accordingly, we urge you to withdraw the Basel III Endgame proposal as written and urge the Federal Reserve, the FDIC, and the OCC to operate in a more transparent and justified manner,” the Senators concluded.
A copy of the letter can be found here.
###