The Federal Reserve is aiming to lessen the costly fluctuations in bank capital demands created by its annual stress tests. But big lenders are pushing for more relief while the central bank is politically weakened and some board members seem keen to please the White House. The Fed must be careful not to give away too much bit by bit by tackling several different regulatory changes in a piecemeal way. A gathering of industry leaders and regulators next month to discuss an integrated review of large banks’ capital requirements, which was announced by the Fed on Thursday, is the place to start.
Financial safety is vulnerable right now. President Donald Trump favors looser regulation in the hopes of promoting growth and squashing what Republicans see as a political focus on climate risks and diversity efforts. At the same time, Trump is trying to undermine Fed independence by hounding Chair Jerome Powell to lower interest rates. Key board members have recently backed early cuts.
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