Federal Reserve official Michael Barr has unveiled new regulatory proposals targeting US banks. The changes would require the country’s biggest banks to boost their capital reserves by an aggregate of 9%. To discuss the implications of these proposals, Catalysts welcomes Chairman of Whalen Global Advisors Chris Whalen.
Whalen argues that the focus of this regulatory effort should have been on market risks rather than capital. He points out that since the Supreme Court overturned the “Chevron deference” doctrine, which previously gave regulatory agencies the benefit of the doubt when interpreting ambiguous laws, federal regulators are now more “vulnerable to losing in court” if banks choose to challenge their decisions legally.
“The large banks are not happy seeing a 25% increase in capital [reserves] because they don’t need it. These banks are giving back capital to investors every quarter. In fact, they would like to give back more. The banks are under-levered in terms of opportunity,” Whalen tells Yahoo Finance. He adds, “So I think that the regulators are still not looking forward to future risks, they’re looking behind.”
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