Why are banks involved in the feds developing regulations to force those institutions to support themselves? I mean it's fucking insane to think banks should have any say in the matter.
this post was submitted on 20 Aug 2024
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In a world of good-faith, rational actors, it is reasonable to consult experts in the industry you're about to regulate. In theory, a good-faith adversarial discussion will root out inconsistencies and logical fallacies within the regulation.
Obviously that's usually not the case in modern politics, but I think the system was designed when it was thought that the average person would be operating in good faith, and in that context it makes sense.
Its framed as being done to "strengthen their financial resilience", but I suspect the motive is to slow down the rate at which banks are creating new money, driving up inflation. If these bank regulations pass, we can lower taxes without blowing up the inflation rate. Or, the Federal Government can spend more without increasing taxes, keeping the inflation rate the same.
The banks hate it because they would issue fewer loans, and therefore make less money. Its takes money out of the pockets of bankers and puts it into the hands of the Federal Government.
I'm generally in favor of markets deciding what gets produced, i.e. letting the banks judge which businesses asking for loans have the best chance of paying them back. However, the market has some blind spots where we're all better off if the government steps in - for example, defense spending, infrastructure, and R&D (investing in NASA has historically provided incredible RoI).
That the Fed is even considering this new approach suggests to me that there is a perceived need for a rush of government spending in the near future, and the current geopolitical landscape suggests it will be spent on weapons.
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https://www.politico.com/news/2024/08/20/fed-regulators-capital-rule-impasse-00174288