Why The Federal Reserve Should Prioritize Taxpayers Over Senate Republicans In Setting Bank Capital Standards

The Federal Reserve is conducting a holistic review of big banks’ capital standards. In response, 10 Republican members of the Senate Committee on Banking, Housing, and Urban Affairs recently sent a letter to Federal Reserve Chair Jerome Powell, arguing against increasing capital for the largest U.S. banks. One of the Fed’s main objectives is the safety and soundness of the banking system. Unsuspecting citizens should not have to bail out banks when their executives socialize losses.

Yet the lawmakers’ letter suggests they are putting their political interests above protecting American taxpayers. There are plenty of economic and market signals, showing that this is exactly the time to analyze whether big banks’ current capital levels would absorb unexpected losses if a downturn materializes.