That Wall Street is making progress in an extraordinary drive to kill the program has garnered criticism from politicians, even prominent Democrats. Banks lobbied Congress, promoted, and threatened lawsuits. They also encouraged officials to scrap and resubmit the plan.
"I don't recall anything being quite this intense at least say, in the last 25 years," said former Independent Community Bankers of America chairman Camden Fine, who successfully lobbied for post-crisis exemptions for local banks.
Three officials said they haven't decided whether to re-propose the regulation, which may delay its completion until a future presidential administration. Powell called regulation "very plausible option." in testimony. Barr said the safeguards will shield banks from unanticipated shocks like last year's bank failures. He also dismissed bankers' fears that higher capital regulations would hurt the economy after the 2007-09 global financial crisis.
"The opposition to the Basel III Endgame proposal is coming from every sector of our economy," stated global bank CEO Kevin Fromer of Financial Services Forum.
After the global financial crisis, the Basel Committee on Banking Supervision set global capital rules. Banks say the idea surpasses Basel and overstates risks. The Bank Policy Institute, a bank lobby, reportedly hired former Labor Secretary Eugene Scalia to build a lawsuit. Two more people said opposition intensity startled officials.
A rare Fed board disagreement is another regulator issue. Governors Michelle Bowman and Christopher Waller opposed it, saying it would hurt borrowers. Chairman Powell and Vice Chair Jefferson doubted. At an October event, Scalia said such dissent might be "extremely valuable" in litigation by proving experts disagree. The Fed will reach a final rule with broad board support, Powell told reporters in November. Bankers say Powell and Fed officials listen. Powell, Barr, Bowman, and Jefferson have met or called hundreds of industry leaders about Basel at least 50 times since September, according to Fed logs.
Powell discussed Basel with Goldman Sachs (GS.N) and Barclays (BAC.N) CEOs, according to records. The Fed chair spoke with other senior bankers in recent months, including JPMorgan (JPM.N) and Bank of America (BAC.N) CEOs, whose conversations are not included in his calendars. Banks rejected or did not comment. Fed officials must talk with FDIC chairman Martin Gruenberg, a Wall Street critic.
Two participants thought early Basel drafts were weaker. Another regulator-briefed person said an early 2023 draft proposed for a single-digit capital increase. All three said FDIC officials pushed for bigger capital levels after Silicon Valley Bank fell. Regulatory official: finalizing the regulation by summer may be optimistic.
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