Text of letter to Quarles (PDF)

Text of letter to Powell (PDF) 

Washington, DC - United States Senators Elizabeth Warren (D-Mass.) Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs' Subcommittee on Consumer Protection and Financial Institutions, and Sherrod Brown (D-Ohio), Ranking Member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, sent a letter to Federal Reserve's Vice Chairman for Supervision Randal Quarles questioning why he is lobbying Congress to insert regulatory favors for big banks into the upcoming COVID-19 relief package. Senator Brown was joined by Senator Warren in also writing to Chairman Powell raising concerns that Quarles is compromising Powell's claims of an independent Fed by working with Senate Republicans to craft legislation that would undermine financial protections Congress passed after the last financial crisis.

"Your requests for Congress to weaken the rules put in place after the 2008 financial crisis to protect our financial system are outrageous and irresponsible, and we are writing to seek an explanation for why - during a historic economic crisis - you are seeking to hand out regulatory favors to big banks that would harm the economy and increase systemic risks," wrote the senators in their letter to Vice Chair Quarles.

After a "monthslong effort" by industry lobbyists and Vice Chair Quarles, the Senate Republicans' coronavirus relief bill is reportedly expected to include language to give federal regulators the power to allow big banks to reduce capital requirements below their 2008 levels -- the same inadequate levels at which the banking system was once brought to the precipice of collapse. The provisions requiring minimum capital requirements passed after the 2008 crisis in the Dodd-Frank Act. Banks and their lobbyists vocally opposed these changes, and have lobbied to weaken them ever since.

The senators also wrote to Chairman Powell that they were alarmed Vice Chair Quarles would be lobbying Congress on behalf of Wall Street interests, when Chairman Powell has repeatedly stopped short of making specific recommendations to Congress regarding much-needed fiscal policy to protect families and workers during the crisis.

The banking system is already weaker because of recent actions taken by the Fed and other banking regulators in the last several months. The first regulatory action it took during this crisis enabled banks to pay out higher dividends after breaching their capital buffers. In April and May, the Fed weakened the supplementary leverage ratio, a key capital requirement for the large banks. Senators Brown and Warren urged the Fed to reverse this rule last month. And in a move that former regulators of both parties have recognized as reckless, Vice Chair Quarles has still not fully prohibited banks from distributing capital to their shareholders. The Senators wrote that these actions demonstrate that Vice Chair Quarles "does not need and should not be given" additional authority to weaken banking rules.