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April 5, 2012

Sheila Bair and Academics Letter To The Federal Reserve For Advocating Tougher Bank Capital Standards

Former Federal Deposit Insurance Corp Chairman Sheila Bair and a group of academics wrote to Federal Reserve on March 30 urging the central bank to impose tougher capital requirements on the largest U.S. banks.

The letter urges the Fed to impose strong capital requirements from firms that will come under enhanced supervision from the Dodd-Frank law, including banks with at least $50 billion in assets and nonbanks that have been deemed as systemically important. 

“The strength of supervisory resolve ebbs and flows, in accordance with political will and agency leadership,” the letter states. “In contrast, simple, straightforward rules… remain constant regardless of whether regulation is in or out of fashion.”

The writers were concerned that regulators would allow to boost stock dividends rather than use these funds to fortify their balance sheets – as was the case in the latest stress-test results. 

The letter was also signed by Simon Johnson of the Massachusetts Institute of Technology, Anat Admati of Stanford University, and Richard Herring of the University of Pennsylvania.

Read the letter here 



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