Woodstock Institute wrote to federal regulatory agencies expressing our strong opposition to their proposal to “Modernize the Regulatory Capital Framework.” We are concerned that this measure pushes a dangerous deregulatory agenda under the cover of “modernization.”
While Woodstock understands the need for regulation to keep pace with the evolution of the banking industry, this proposal throws out guardrails that exist precisely because of previous deregulatory mistakes that had a deleterious impact on the long-term economic security of American families, including by:
- Slashing bank capital requirements, which are meant to be the cushion that prevents a financial crisis from becoming a neighborhood catastrophe. History has shown that when large banks are undercapitalized, the resulting “credit crunches” hit low-to-moderate income (LMI) communities first and hardest.
- Reducing the impact of short-term wholesale funding on the evaluation of a bank’s risk level.
- Including 2 dozen instances where US bank requirements are weaker than international Basel III standards, which were created to shore up the financial system in the wake of the 2008 financial crisis.
We have seen what happens when we let banks grade their own homework: Communities, not bank executives, lose their homes and their wealth as a result.
