A House subcommittee held a hearing this week on what many called the lack of economic analysis in federal banking regulators proposed changes to bank capital requirements.
The hearing by the Subcommittee on Financial Institutions and Monetary Policy featured several speakers voicing concerns about what they saw as the inadequate economic analysis in the rule, particularly since it could have a large impact on availability of affordable credit for families, small businesses, home buyers, farmers, and municipalities.
Speakers pointed out that on only 17 out of a total 1087 pages, do banking regulators offer regulatory and economic impact analysis, which they called brief and inadequate. The analysis, they said, consists of unsubstantiated conjecture on potential regulatory effects of the proposal, academic literature on the economic effects of bank capital, and speculation on potential economic effects of the proposal.
Subcommittee leaders called the brief analysis “heavy on assertions that cannot be corroborated” as the data and models on which they are based are not provided.
Subcommittee Chairman Andy Barr (R-KY), along with U.S. Reps. Brad Sherman (R-CA), Blaine Luetkemeyer (R-MO), David Scott (D-GA), Barry Loudermilk (R-GA), and Sean Casten (D-IL) were among the lawmakers that voiced concerns about various aspects of the rule.
Further, comment letters were sent in by U.S. Reps. Patrick McHenry (R-NC), Bill Foster D-IL), Dan Meuser (R-PA), Joyce Beatty (D-OH), Gregory Meeks (D-NY), Juan Vargas (D-CA), Steven Horsford (D-NV), Ann Wagner (R-MO), and Brad Sherman (D-CA).
McHenry, chair of the House Financial Services Committee, and Barr asked the Government Accountability Office (GAO) to examine the role U.S. federal banking agencies played in work at the Basel Committee on Banking Supervision to develop the recent Basel III proposal.
Also, committee Republicans urged the regulators to withdraw the proposal due, in part, to its lack of economic analysis and weak justification.