Stop the Next Bank Bailout. Support the Fed’s Proposal to Increase Large Bank Capital Requirements Now
The shock absorber at a bank is called capital. It’s a buffer that ensures banks, and not taxpayers, take the hit when something goes wrong.
And with the reckless behavior of Wall Street banks, 'something' always goes wrong.
After a rebuilding of bank capital in the wake of the 2008 financial crisis, Trump appointees turned around and chipped away at it. This change, along with a general lack of oversight from Wall-Street-friendly regulators under Trump, led straight to the collapse of Silicon Valley Bank and two others in 2023.
Now, a Biden appointee on the Federal Reserve Board -- Michael Barr, the Fed’s vice chair for supervision -- is leading the charge to boost capital requirements and prevent the next wave of bank collapses.
The banking industry -- with its lobbyist power and campaign cash to dole out to their lackeys in Congress -- is (of course) vigorously opposing this move, because it would limit their ability to engage in risky activities that are lucrative for them but dangerous for the system.
If we want a more resilient financial system and a stronger economy overall, we must require the nation’s largest banks to increase the financial cushions they hold in case things go south. This inherently works to limit their riskier ventures, like investment banking and trading operations … and compels them to do more actual job-creating activity like lending to small businesses.
Put simply, the banks will never do the right thing unless we force them to. And they’re already mounting a fierce lobbying and PR campaign to protect their fat profit margins and continue engaging in the risky behaviors that inevitably lead to collapses and the need for bailouts.
Tell the Federal Reserve Board of Directors to hold firm against the banking industry’s lobby campaign, and institute the higher reserve capital requirement for large banks by adding your name now.
Federal Reserve Board of Governors:
I strongly support the Federal Reserve’s proposal to increase capital requirements on large banks.
After 2008, the Great Recession, the COVID-era financial crisis, and this year’s banking collapses, it’s clear that Wall Street and the banking industry have precisely ZERO credibility left on this issue and must be forced to do the right thing.
Overall, the effective operation of the U.S. economy, and more generally the broader public interest is better served when banks are not collapsing and threatening to take down the whole financial sector as we saw in 2008. The proposal to increase large bank capital requirements will reduce systemic risk AND incentivize banks to earn their profits from more productive activities such as lending in our communities.
So I urge you to stand firm against the banking industry’s lobbying campaign and proceed with the new capital requirements as planned.