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No, JP Morgan Chase, Financial Protection Capital Rules Should Not Be Lowered; They Should Be Increased

FOR IMMEDIATE RELEASE
Tuesday, February 27, 2018
Contact: Nick Jacobs, 202-618-6430 or njacobs@bettermarkets.com

 

Washington, D.C. – Dennis Kelleher, President and CEO of Better Markets, issued this statement following a call by JP Morgan Chase to alter the capital buffers for GSIBs (global systemically important banks): 

“JP Morgan Chase claimed this morning that the critical capital financial protection rules applicable to just the eight biggest, most dangerous US banks (so-called “GSIBs”) should be lowered.  It claimed that this was necessary for “strong U.S. economic growth.”

“The claim is baseless and such a change would be irresponsible if not reckless and is not necessary.  Regulators should not weaken key financial protection rules on the largest, most dangerous banks in the world this late in the business cycle with almost $2 trillion of fiscal and tax stimulus coming after ten years of easy money inflating stock prices and asset values.  Allowing these too-big-to-fail banks to add yet more leverage to the financial system at this point would be irresponsible.  In fact, with bank revenue, profits, bonuses and lending at or near historic highs, this is when regulators should implement countercyclical measures increasing capital and liquidity requirements. 

“In addition to being irresponsible from a systemic stability point of view, more leverage in the banking and financial sectors is also not needed.  The rules do not and will not inhibit economic growth because the current brake on growth isn’t credit supply; it’s a lack of credit worthy borrowers due to under-employment, wage stagnation and historically high levels of debt, which now exceed 2007 levels.  That requires lenders to be particularly vigilant in providing credit and regulators to be alert to the erosion of underwriting and lending standards.

"Moreover, durable, sustainable economic growth – rather than a boom and bust cycle -- requires a strong banking sector and rigorous financial protection rules that ensure financial stability and avoid crashes.  Well capitalized banks lend through the business cycle.  Banks without such buffers pull back in downturns, like the one inevitably coming, contracting lending and making the downturn worse.  Finally, the eight uniquely dangerous US GSIBs are not the only providers of credit available to credit-worthy borrowers.  If those eight gigantic banks are unable to satisfy valid credit demand, then one of the other almost six thousand banks or the thousands of other financial institutions in the US will be happy to meet that demand.”

 

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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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