Banks Want Efficiency. Critics Warn of Backsliding.

[sinkingfeeling]

https://www.nytimes.com/2019/08/20/business/bank-regulation-federal-reserve.html?te=1&nl=morning-briefing&emc=edit_NN_p_20190820&section=topNews?campaign_id=9&instance_id=11764&segment_id=16306&user_id=57f1c0f5a60ec01ec4cc87da47a0fd06&regi_id=93720277tion=topNews

WASHINGTON — A decade after big banks needed government support to dig out of the financial crisis, the Federal Reserve is slowly, but steadily, making a series of regulatory changes that could chip away at new requirements put in place to prevent a repeat of the 2008 meltdown.

Some of the changes, seemingly incremental and technical on their own, could add up to a weakening of capital requirements installed in the wake of the crisis to prevent the largest banks from suffering the kind of destabilizing losses that imperiled the United States economy.

But some current and former Fed officials worry that the central bank and its fellow regulators are giving large banks, which are making big profits, an unnecessary gift that could leave the economy exposed in the next downturn. They say the overseers should be forcing banks to maintain or even build up their defenses given the strong economy, which is in its longest expansion on record, rather than eroding those buffers.

Executives have a reason for opposing tougher capital requirements. They force banks to limit stock buybacks and dividend payments, curbing moves that help lift share prices. A big chunk of senior bank executives’ compensation is made up of stock. Yet existing capital requirements have not stopped banks from returning large amounts of excess capital to their shareholders. Last year, the eight largest American banks spent $104 billion on stock buybacks and dividend payments, up nearly a fourth from $84 billion in 2017.

The Fed is also expected to soon approve changes to the Volcker Rule, which was ushered in after the crisis to limit banks’ investment activities. The revised rule, which must be approved by the Fed and four other financial regulators, could give banks more flexibility to invest in private equity and hedge funds and will probably be “helpful to the big banks, especially in terms of making compliance easier,” Ian Katz, an analyst with Capital Alpha, wrote in a note previewing the move. The Federal Deposit Insurance Corp. will discuss the proposal on Tuesday.

[Turbineguy]

1. They've got only

about a year left to collapse the economy. They'll have to work hard. They should have started earlier.