WASHINGTON, D.C.— Dennis Kelleher, Co-founder, President and Chief Executive Officer of Better Markets, released the following statement in response to statements made by Chairman Jay Powell during testimony to the Senate today:
“Federal Reserve Chair Powell’s responses and non-responses today to Senator Warren’s laudable line of questioning on his dangerous and irresponsible deregulations were misleading, evasive, inaccurate and/or false. As he did the last time Chairman Brown and Senator Warren pressed him on these issues, Chair Powell failed to be straight with Congress and the American people about his deregulation and its implications.
“First, he denied weakening the stress tests by saying “I don’t think we have weakened the stress test,” but, regardless of what he “thinks,” the actions the Fed has taken under his chairmanship with his full support have undeniably weakened the stress test and made it more predictable, as we have detailed here. As if to add insult to injury, he also said he has no regrets about the changes made to the stress test, and he failed to respond to a repeated question that was clearly about the Fed’s effective removal of the so-called “qualitative objection” that previously allowed the Fed to restrict dividends and share buybacks based on supervisory findings.
“Second, when asked if he regretted the weakening of the Volcker Rule, he stated that “it was widely agreed that the Volcker rule as implemented was complex and not workable.” That is totally inaccurate. Such criticism was only “widely agreed” by Wall Street’s biggest banks, their allies and their army of lobbyists who have aggressively attacked the Volcker Rule’s ban on those banks’ high risk and dangerous proprietary gambling since it was first proposed. We (and many others) opposed that deregulation here and here, but the Fed used the industry’s one-sided complaints as an excuse to make baseless changes that seriously weakened the applicability and effectiveness of this key financial protection rule.
“Finally, when asked about the weakening of critical liquidity requirements for banks between $250 and $700 billion in assets, Chair Powell pointed the finger back at Congress stating “that was tailoring [which] the law that had been passed through this committee required.” That statement is just false, and this deregulation was very dangerous. The law Congress passed (Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA)) had no requirement for the Fed to weaken liquidity requirements for banks in that range, which Chair Powell’s colleague Governor Brainard pointed out in her opposition here and which Chair Powell knows.
“The proper regulation of the nation’s banks is critical to protect Main Street families’ jobs, homes, savings and standard of living against devastating crashes and taxpayer bailouts as happened in 2008. Chair Powell and the Fed should not have dangerously deregulated the banks, but Chair Powell should at least be honest with the Congress and the American people about what he did.”
Better Markets is a non-profit, non-partisan, and independent organization founded 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.