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Better Markets’ Letter to Senate Banking Committee on Key Financial Stability Issues for Tuesday’s Hearing with Federal Chairman Jay Powell

FOR IMMEDIATE RELEASE
Monday, February 22, 2021
Contact: Pamela Russell at 202-618-6433 or prussell@bettermarkets.com
 
Better Markets’ Letter to Senate Banking Committee on Key Financial
Stability Issues for Tuesday’s Hearing with Federal Chairman Jay Powell
 
Washington, D.C.  –  Dennis M. Kelleher, President and Chief Executive Officer of Better Markets, issued the following statement in connection with a letter sent today to the Chairman, Ranking Member and Members of the Senate Committee on Banking, Housing and Urban Affairs regarding the hearing on Tuesday, Feb. 23, 2021, with the Chairman of the Board of Governors of the Federal Reserve System:
 
“Although not acknowledged often enough, the Federal Reserve has a tri-mandate: price stability, maximum employment and financial stability. While price stability and maximum employment receive the most attention, financial stability is equally important and can easily undermine the other goals, as painfully evidenced by the financial crash of 2008 and the pandemic-caused economic and financial crisis beginning last March.
 
“That is why this Committee must carefully review the Federal Reserve’s deregulatory actions during the last four years, which have been substantial and have weakened the Dodd-Frank Act’s financial protection rules. These unwarranted actions have increased the risk to financial stability and our economy, as we detailed in a White Paper released last December. Those key deregulatory changes include:
 
1) lowering capital standards, including those associated with the Federal Reserve’s stress testing program;
2) weakening what had been more assertive post-crisis banking supervision;
3) dropping liquidity standards for large banks with less than $700 billion of assets;
4) reducing the frequency at which large banks must prepare resolution plans (“living wills”);
5) eliminating margin requirements for certain derivatives positions transacted between banks and their affiliates; and
6) changing the Volcker Rule to gut some of the key limitations on banks’ proprietary trading and other risky investments (e.g., in hedge funds and private equity).
 
“Our letter to the Committee, our December White Paper and a previous White Paper demonstrate that the Dodd-Frank Act and other pre-Trump-era banking rules prevented the pandemic-caused crisis beginning in March 2020 from becoming a banking crash. The Federal Reserve deregulation agenda over the last four years risks snatching defeat from the jaws of victory: that deregulation must be reversed and the financial protection rules must be strengthened. These and other critical issues are currently pending before the Federal Reserve, including ongoing capital distributions and changes to the vital supplemental leverage ratio (SLR), which the financial industry is lobbying relentlessly to weaken dangerously. As we have pointed out in the past, Chairman Powell must be asked about these and related financial deregulation by the Federal Reserve.”
 
Our letter to the Committee is available here, the December 2020 White Paper is available here, and the June 2020 White Paper is available here.
 
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.com

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