June 18, 2024

Warren Pushes Federal Reserve to Finalize Increased Basel III Bank Capital Requirements

Senator Criticizes Fed Chair Powell’s Proposed Rollback of Rules

"Taking orders from the industry that caused the 2008 economic meltdown would sacrifice the financial security of middle-class and working families to line the pockets of wealthy investors and CEOs, and further undermine public faith in the integrity of the Fed ..."

Text of Letter (PDF)

Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.) wrote to Federal Reserve (the Fed) Chair Jerome Powell amid public reports that he is giving in to JPMorgan CEO Jamie Dimon’s demands and intends to halve the Fed’s proposed increase in bank capital requirements. Senator Warren urged Chair Powell to allow the Fed Board to convene for a vote on the original, 16% capital increase by June 30.

Following the 2008 market crash, global financial regulators determined that the capital increase - known as the “Basel III Capital Rule” - was needed to reduce the risks of another financial crisis. The increase would apply to the 37 biggest banks – those with more than $100 billion in assets. Big bank CEOs have argued that the proposed rules would decrease lending. However, data from 2013 to 2019 showed that lending remained stable when capital requirements increased—and banks continued to make steep profits.

“The only cutbacks banks will be forced to make if the Basel rules are finalized will be payments to their investors and executives,” wrote Senator Warren. 

Senator Warren also highlights that according to the Fed’s authorizing statute, the supervision of banks is a responsibility explicitly delegated to the Fed’s Vice Chair of Supervision, Michael Barr, who supports the rule as originally proposed. In testimony before the Senate Banking Committee, Chair Powell himself stated, “I would not see myself as stopping those kind of proposals from reaching the Board, since the law seems to indicate that that’s the job of the Vice Chair for Supervision.” Senator Warren called on Powell to resist lobbying by big banks and adhere to global financial regulators’ recommendations to implement the capital requirements.

“These rules are critical and long overdue, particularly in the wake of the Silicon Valley and Signature Bank failures, and as risks from the weak commercial real estate market and other economic threats ripple through the banking system,” concluded Senator Warren. 

Senator Warren has led extensive oversight efforts to hold the Federal Reserve accountable for various ethics, supervision, and regulation failures: 

  • In March 2024, in a bipartisan letter to the Federal Reserve’s Office of Inspector General, Senators Warren and Scott (R-Fla.) called out the Fed IG’s failure to hold officials accountable for violating Fed rules and fostering a culture in which severe conflicts of interests go consistently unchecked. 
  • In July 2023, United States Senator Elizabeth Warren (D-Mass), Chair of the Senate Banking, Housing, and Urban Affairs Subcommittee on Economic Policy, and Senator Rick Scott (R-Fla.) sent a letter to Mark Bialek, Inspector General (IG) of the Federal Reserve (Fed), highlighting his inherent conflicts of interest and the need to make the position a Presidential-appointed, Senate-confirmed role.
  • In May 2023, chairing a hearing of the Senate Banking, Housing, and Urban Affairs Committee Subcommittee on Economic Policy, Senator Elizabeth Warren (D-Mass.) questioned Federal Reserve Inspector General Mark Bialek and a panel of academic experts on the independence of the IG office and the regulatory and supervisory failures that contributed to Silicon Valley Bank’s collapse.
  • In May 2023, Senators Warren and Rick Scott (R-Fla.) sent a letter to Federal Reserve (Fed) Inspector General (IG) Mark Bialek, reiterating the need to make his position a presidentially-appointed, Senate-confirmed role to provide greater accountability at the Fed.
  • In May 2023, Senator Warren sent a letter to Mark Bialek, IG of the Federal Reserve, rebuking him for his failure to hold Fed Chair Powell and senior Fed officials accountable for major ethics breaches, and the IG’s sham investigation of the Fed trading scandal, both of which undermine his recommendations for strengthening the Fed’s disturbingly weak ethics rules.
  • In May 2023, Senator Warren and John Kennedy (R-La.) sent a letter to the Fed IG, inviting him to testify at their hearing on the Fed’s role overseeing Silicon Valley Bank (SVB) before its failure and to consider legislative reforms that strengthen transparency and accountability at the Fed. 
  • In April 2023, following the Fed’s report on SVB’s failure, Senator Warren released a statement calling on the Fed to immediately adopt stricter bank oversight and called out Chair Powell’s failure to supervise and regulate banks that posed a systemic risk to the economy. 
  • In March 2023, Senator Warren and Thom Tillis (R-N.C.) led a bipartisan group of senators to reintroduce the Financial Regulators Transparency Act, bipartisan legislation that would subject regional Federal Reserve Banks to the Freedom of Information Act (FOIA) and ensure their responsiveness to congressional and public information requests.
  • In March 2023, Senators Warren and Rick Scott (R-Fla.) introduced bipartisan legislation to require a presidentially-appointed and Senate-confirmed Inspector General to the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection.
  • In March 2023, Senator Warren led 11 senators in a letter to Fed’s Vice Chair for Supervision, Michael Barr, calling on him to exercise the Fed’s authority to apply stronger regulation and supervision to banks with assets totaling $100 to $250 billion. 
  • In March 2023, Senator Warren sent a letter to Fed Chair Powell, criticizing his leadership failures at the Fed that directly contributed to the failures of SVB and Signature Bank, and the significant risk to the banking system and the economy unleashed by those collapses. 
  • In March 2023, Senator Warren delivered a speech on the Senate Floor about the failures of SVB and Signature, spoke about her new legislation, the Secure Viable Banking Act, which would reverse the mistakes that Congress and President Trump made with rollbacks of Dodd-Frank
  • In March 2023, Senator Warren called on Chair Powell to recuse himself from the Fed’s review of the SVB failure. 
  • In December 2022, Senator Warren and then-Senator Pat Toomey (R-Pa.) introduced the bipartisan Financial Regulators Transparency Act, legislation that would strengthen Federal Reserve accountability and ensure that no financial regulator can withhold critical ethics-related information from Congress.
  • Senator Warren has previously sent letters to Chair Powell on November 7, 2022, August 11, 2022, January 10, 2022, December 7, 2021, and October 21, 2021, and requested that the Fed publicly release additional information about its trading scandal, but the Fed has failed to adequately respond. 
  • In October 2022, Senator Warren called out Atlanta Fed President Raphael Bostic for his “alarming failure” to disclose financial transactions, which speaks to “further evidence of the depth of the ethics problem at the Fed.”
  • In May 2022, Senator Warren also secured ethics commitments from Michael Barr, who was ultimately confirmed as Fed Vice Chair for Supervision.
  • In February 2022, Senator Warren secured significant ethics commitments from several Fed Board nominees, including: Dr. Lael Brainard, nominee to serve as Vice Chair on the Federal Reserve Board, Sarah Bloom Raskin, nominee to serve as Vice Chair for Supervision on the Federal Reserve Board of Governors, and Drs. Lisa Cook and Philip Jefferson, nominees to serve as members of the Board of Governors. Bloom Raskin, Cook, and Jefferson agreed to a four year recusal period from matters which they oversee on the Board of Governors, not to seek a waiver from these recusals, and not to seek employment or compensation from financial services companies for four years after leaving government service. 
  • In January 2022, Senator Warren called on Chair Powell to immediately release information related to Fed officials' trades and changes to the Fed’s ethics policy after new and troubling revelations about then-Vice Chair Richard Clarida’s trades in March 2020.
  • As the ethics scandals involving top level Fed officials unfolded in September and October of 2021, Senator Warren called out the culture of corruption at the Fed and raised deep concerns over conflicts of interests that have undermined public confidence in the Federal Reserve System. 
  • In an October 2021 speech on the floor of the Senate, Senator Warren called out the culture of corruption among high-ranking Fed after recent reports of ethically questionable financial activity by high-ranking Fed officials, including then-Vice Chair Clarida and two regional Fed presidents.