At first, banks leveraged the repo market to force the Fed to ease liquidity & capital rules; now they leverage the coronavirus. Whatever it takes.
By Wolf Richter of WOLF STREET.
The largest bank lobbying group in the US, the Bank Policy Institute, is now leveraging the coronavirus to pressure the Fed to relax nettlesome banking regulations imposed on banks after the Financial Crisis. These regulations, particularly the liquidity and capital requirements, were imposed on banks in order to avoid a replay of the Financial Crisis.
BPI’s lobbying piece, released yesterday – “Actions the Fed Could Take in Response to COVID-19” – was authored by three people, including BPI CEO Gregory Baer, who’d been Managing Director and General Counsel for Corporate and Regulatory Law at JP Morgan Chase from 2010 through 2015, and Deputy General Counsel for Corporate Law at Bank of America from 2006 through 2010. Both banks were massively tangled up in the Financial Crisis.
BPI’s bord is comprised of bank CEOs, including the CEOs of the four largest banks in the US: Jamie Dimon (CEO, JP Morgan), Brian Moynihan (CEO, Bank of America), Michael Corbat (CEO, Citigroup), and Charlie Scharf (CEO, Wells Fargo). And they can’t stand the limits that bank regulations impose on them.
This comes just months after the biggest banks, spearheaded by JP Morgan, blamed the nettlesome liquidity requirements imposed on banks after the Financial Crisis for the repo market blowout. Dimon admitted during the Q3 earnings call in October last year that JP Morgan could have lent to the repo market as repo rates were surging, and could have eased the problem, but refused to because of the liquidity requirements.
There have been allegations that the biggest banks purposefully refused to lend to the repo market in order to force the Fed to ease the liquidity regulations…