Wall Street banks are working towards significant regulatory relief as the Federal Reserve aims to finalize a major overhaul of bank capital rules by the end of the year. This initiative comes under the leadership of US President Donald Trump's appointed regulators. Despite Trump's appointments of four out of seven Fed governors, industry executives indicate that banks hope for Democratic support, particularly from Vice Chair for Supervision Michelle Bowman, to ensure that any changes are less likely to be reversed in the future.
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As Democrats are projected to potentially gain control of one or both chambers of Congress in the upcoming elections, Wall Street banks are strategizing on how to protect their interests amid expected scrutiny of Trump’s regulatory policies. Michael Bright, CEO of the Structured Finance Association, noted that bipartisan support often leads to more durable regulatory outcomes. He emphasized that the market anticipates the Fed is seeking consensus.
Democrats generally advocate for stricter regulations aimed at preventing taxpayer-funded bank bailouts, while Republicans argue that excessive regulation can hinder lending and economic growth. In March, Bowman proposed changes that would reduce capital requirements for large banks by approximately 4.8%, reversing a previous plan by her Democratic predecessor, Michael Barr, which sought to increase capital requirements by 20%. Banks opposed Barr's proposal, rallying support from both congressional Republicans and some Democrats to push for a revision. Barr resigned from his supervisory position last year to avoid conflict with Trump but remains on the board, expressing concerns that Bowman's plan could elevate systemic risks. While progressive Democrats and advocacy groups share Barr's apprehensions, other Democrats have not publicly addressed the issue.