Barr Delivers Opening Remarks at Hearing to Review Prudential Regulators’ Implementation of Basel III Endgame
Washington,
September 14, 2023 -
Today, the House Financial Services Subcommittee on Financial Institutions and Monetary Policy, led by Chairman Andy Barr (KY-06), is holding a hearing entitled “Implementing Basel III: What’s the Fed’s Endgame?” Ahead of today’s hearing, all Republicans on the House Financial Services Committee sent a letter demanding the prudential banking regulators withdraw their misguided Basel III Endgame proposal due to its flawed scope, depth, motivation, and process.
Watch Chairman Barr’s opening remarks here.
Read Chairman Barr’s opening remarks as prepared for delivery:
“Federal banking regulators recently proposed several new rules to rewrite regulations in the financial system, largely on a partisan basis.
“The proposed rule that would have the largest effect is a so-called Basel III Endgame proposal.
“That proposal is underdeveloped, misleadingly motivated, and written behind closed doors principally by the Fed’s Vice Chair for Supervision as part of his ‘holistic’ review.
“That proposal is being sold partly under the guise of implementing the Basel Committee on Banking Supervision’s recommended Basel III framework, thereby outsourcing U.S. standards to an opaque global governance committee in Europe.
“But the proposal put forward goes far beyond those recommendations.
“It would put the U.S. unfortunately ahead in a race to a gold-plated top for global capital requirements and push the U.S. to the bottom for global competitiveness.
“The proposal would install arbitrary and extreme increases in required capitalization for what regulators, Biden administration officials, and Fed stress tests have said is an already resilient, well-capitalized U.S. banking system.
“The proposal is partisan, as evidenced by the Fed and FDIC Board votes and lack of consensus and unanimity among Fed Governors and FDIC Directors.
“Partisan rulemaking by Democrat appointed federal banking regulators is a tacit admission that they are content surrendering independence of their agencies for short-term political gain.
“The Basel-related capital proposal lacks a convincing foundation, and it is cynical to put forward as a rationale the non-credible evaluation of March banking instability authored and engineered solely by the Vice Chair for Supervision at the Fed.
“The proposal appears in many areas to simply be arbitrary and capricious.
“The proposal was put forward with shockingly little quantitative analysis of what the impacts will be, where the unintended consequences will be felt, and there is no substantive cost-benefit analysis.
“Members of this committee from both sides asked for such analysis from the Fed’s Vice Chair for Supervision, yet the request was essentially ignored.
“The proposal also presents unexplored threats to capital markets, including markets for Treasury securities, and no one knows how the proposal will interact with other recent proposals by the regulators, with yet more seemingly on the horizon.
“In a time of historic inflation, the fastest increases in interest rates in modern history, and a growing likelihood of a credit crunch, now is not the time to raise capital levels.
“Such action threatens to further constrain credit availability and put already-sensitive sectors, such as commercial real estate, in further peril.
“The proposal would be an effective repeal-by-rule-writing of bipartisan Congressional intent in the S. 2155 tailoring law; a repeal that has been a partisan goal for some even before the March banking stresses and has essentially been instructed by President Biden.
“The Basel III Endgame proposal is just a start for Democrat-appointed federal bank regulators.
“Since that proposal was made in July, proposals for long-term debt and resolution plans have been put forward, which this Subcommittee will consider in our next hearing.
“And we have heard that even more is in the pipeline, yet the regulators in charge will not directly tell Congress or the American people and possibly even their fellow Board Members of their plans.
“Federal banking regulation under the Biden administration has unnecessarily become divisive and partisan, which itself is an emerging threat to stability.
“The divisive, underdeveloped, and arbitrary recent Basel III Endgame proposal should be withdrawn and replaced with a proposal that focuses on addressing problems that exist and uses adequate input from the private sector, Congress, and robust impact and economic analysis.”
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