Washington, D.C.  –  Dennis M. Kelleher, President and Chief Executive Officer of Better Markets, issued the following statement on Better Markets’ comment letter calling on bank regulators to strengthen, not weaken, limits on capital distributions via dividends and executive bonuses during the unfolding pandemic and economic crisis.

“Allowing, much less encouraging, banks to waste capital during a crisis is not only dumb, but dangerous. The amount of capital a bank has is what enables it to absorb losses and continue lending, which is especially important during an economic downturn like the crisis ravaging the country today. Moreover, capital is all that stands between a failing bank and either bankruptcy or a taxpayer bailout. That’s why banks are required to have capital cushions and why capital should be preserved, not wasted or ejected.

“Nevertheless, the Federal Reserve, the OCC, and the FDIC have issued a rule to make it easier for banks to eject capital by paying executive bonuses and shareholder dividends. This is the wrong regulatory approach at the wrong time. Moreover, it benefits the wrong people: while Main Street Americans are suffering from the economic catastrophe caused by the pandemic, this capital will be showered on the richest Americans.

“Rather than enabling the waste of capital, the banking regulators should do the opposite and require banks with more than $100 billion in assets to preserve their capital by immediately restricting all discretionary capital distributions for the duration of the crisis. That is what banking regulators should have done but did not do before the 2008 financial crash. Rather than ignoring that painful lesson, banking regulators should learn from it and act now before it is too late as it was in 2008 when their inaction necessitated taxpayer bailouts.”   

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.com.