Fed Chairman Powell under pressure from Senator Warren to prioritize his duties and not act at the behest of JPMorgan Chase CEO Dimon.
Senator Elizabeth Warren Urges Stronger Bank Regulations at the Federal Reserve
Senator Elizabeth Warren, D-MA, has written a letter to Federal Reserve Chair Jerome Powell, expressing concerns about the Fed's approach to bank regulations. The letter, penned on Monday, urges Powell to allow the Board to convene for a vote on a proposed 16% capital increase for the nation's biggest banks by June 30.
The senator's letter comes amidst reports of extensive lobbying by big-bank executives, including JPMorgan Chase CEO Jamie Dimon, who allegedly pressured Fed officials to delay the proposal. According to The Wall Street Journal, Dimon and other executives met with Powell more than a dozen times between July 2023, when the capital requirements proposal was first floated, and March.
Warren's letter questions why the Fed has not voted on the countercyclical capital buffer (CCyB) for the last five years, despite economic conditions that warrant its activation. The senator points to systemic vulnerabilities such as rising private credit and risks linked to trade disputes, but stops short of directly accusing Fed officials of a conflict of interest caused by lobbying or insider influence.
Instead, Warren's letter focuses on urging stronger regulatory action and accountability from the Fed leadership. She criticizes the Fed for weakening bank safeguards amid economic uncertainty and urges the Fed to strengthen protections to prevent risks to taxpayers and the economy.
Meanwhile, the European Union has decided to delay until 2026 the Basel III upgrade that governs how banks cover market risks in their trading books. This decision, according to Mairead McGuinness, the EU's financial services commissioner, ensures a global level playing field, giving time to see what others are doing.
Senator Sherrod Brown, D-OH, has also written to Acting Comptroller of the Currency Michael Hsu and outgoing Federal Deposit Insurance Corp. Chair Martin Gruenberg, urging them to follow through on measures to toughen bank merger guidelines.
The ongoing debate highlights the importance of regulatory oversight in maintaining financial stability and protecting taxpayers from potential risks. As the situation unfolds, it remains to be seen how the Federal Reserve will respond to Senator Warren's calls for action.
[1] Warren's Letter to Powell [2] The Wall Street Journal Report [3] Sherrod Brown's Letter [4] EU's Decision on Basel III
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