Today’s Fed Rules are Win-Win: Protecting U.S. Taxpayers & the Global Financial System

 

“The Federal Reserve Board is to be congratulated for passing strong rules today that protect U.S. taxpayers and the global financial system, while also substantially reducing the need for future bailouts. For anyone genuinely concerned about global financial stability, today’s rules are win-win,” said Dennis Kelleher, President and CEO of Better Markets, Inc., an independent nonprofit organization that promotes the public interest in the financial markets.

 

“No one should forget that it was the U.S., not the UK, France, Germany or any other country, that bailed out and prevented the collapse of the global financial system in 2008 and 2009. For example, in September 2008, the U.S. bailed out AIG and 10 of AIG’s top 16 bailed-out counterparties were foreign banks. On top of that, nine of the top 20 largest users of the Federal Reserve Board’s emergency lending facilities were foreign banks. The new rules are a direct attempt to prevent a repeat of those types of bailouts in the future,” Mr. Kelleher said.

 

“The Federal Reserve Board’s new rules will require the U.S. operations of the very largest foreign banks to meet new standards that will make them substantially safer and able to withstand financial shocks. While weaker than the initial proposal, the rules finalized by the Fed are stronger than banking industry lobbyists and foreign regulators hoped for or expected. They only apply to fewer than 20 foreign banks, whose U.S. subsidiaries will now have to comply with the same standards as U.S. banks, creating a level playing field and preventing foreign banks from shopping around for the most favorable rules. The Fed still has work to do, but today’s rules send a strong message that it is serious about preventing another global financial crisis and reducing the risks of future bailouts,” Mr. Kelleher concluded.

 

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Better Markets is an independent, nonprofit, nonpartisan organization that promotes the public interest in financial reform in the domestic and global capital and commodity markets. Better Markets advocates for transparency, oversight, and accountability with the goal of a stronger, safer financial system that is less prone to crisis and failure, thereby eliminating or minimizing the need for more taxpayer funded bailouts.