Hi friend, 

As the summer heat hits Washington, it was nice to be back in the Senate (where I worked for almost 8 years) and attend the Banking Committee nomination hearing for Dr. Phillip Jefferson to be Vice Chair and Dr. Lisa Cook and Dr. Adriana Kugler to be Governors of the Federal Reserve Board. All three nominees are extremely well qualified and displayed their experience, intelligence, and thoughtfulness at the hearings. In addition to impressive traditional accomplishments and abilities, the nominees also bring distinctive backgrounds and experiences to the Board, with their racial and gender diversity as well as unique perspectives on key issues of economic growth, the labor market, and financial markets. Finally, the Fed is starting to look like America!

Chair Powell was also in Congress last week, appearing before the Senate and House, but he failed to provide answers on a number of the key questions facing our financial system. Powell (along with former Fed Vice Chair for Supervision Quarles) enacted broad and deep deregulation of the biggest banks while weakening supervision, which is what they were appointed to do.  Powell acts like he had little if anything to do with that even though he didn’t just vote for every one of those deregulatory rules but was a cheerleader for them in his testimony and statements.  The upshot of all that was the collapse of Silicon Valley Bank, Signature Bank, First Republic Bank, and the ongoing banking crisis (as Better Markets said at the time in 2017-2020 when opposing those rules throughout the last administration).  Sure, jacking up interest rates at an historic pace and amount was the match that ignited that crisis, but weakening the regulation and supervision of those banks is the reason they were not able to withstand the inevitable interest risk that always materializes sooner or later.

Powell did not take any responsibility for the banking crisis and did not provide a clear plan of action on how the Fed would prevent or mitigate future crises. The Fed simply must start acting with as much urgency, creativity, and decisiveness in preventing the next crisis as it does when bailing out banks when they get into trouble.  It’s much cheaper and better for Main Street to prevent them than cleaning up afterwards.  So far, the cost of the three bank failures is about $31.5 billion, which the banks will pass along to all Americans in higher fees and costs for everyday services and products. On top of that, the SVB-caused credit contraction can be expected to reduce GDP growth by between .5% and 1% according to Goldman Sachs and JPMorgan Chase.  These are real and meaningful costs that could and should have been avoided if the regulators didn’t follow the Siren song of deregulation.  As we spelled out here, the Fed should be enacting immediately effective interim final rules to address these well known, long-standing weaknesses, including capital, liquidity, resolution planning and stress tests.

Unfortunately, Powell also continues to fail to properly address the egregious breach of trust by senior Fed officials who engaged in personal trading during the pandemic.  As hundreds of thousands of Americans were dying and tens of millions were being thrown out of work due to a pandemic that gripped the country with fear, some of the most senior officials at the Fed were making dozens of multimillion-dollar trades, seeking to profit during the disaster. While previously offering partial cosmetic policy changes that serve more as a cover up of past misconduct, Powell still hasn’t addressed key questions left unanswered in the materially incomplete and misleading report issued by his subordinate, the Fed IG.  To regain the trust and confidence of the American people, Chair Powell should straightforwardly answer the key questions (outlined in number 6 here).

We hope the Senate quickly confirms the three pending nominees and that the Fed becomes much more transparent and accountable to the American people while also better protecting them from the dangers and damage of an under-regulated and under-supervised banking system.

Best,
Dennis

Dennis Kelleher
Co-Founder, President & CEO, Better Markets

The Chair of the Federal Reserve Board is required to testify before Congress so that the American people through their elected representatives can have some measure of transparency, oversight, and, ideally, accountability for the Fed’s actions. Given those actions impact the lives, livelihoods, and standard of living of every American, Better Markets wrote suggested questions about the key issues facing our financial system and economy.

Dennis Kelleher discussed Chair Powell’s testimony with Romaine Bostick on Bloomberg TV's The Close. Bostick noted after the interview, “[That was] Dennis Kelleher over at Better Markets, a huge presence in Washington, D.C. A nonprofit, of course, established to make finance and government serve society a little bit better."

President Biden has nominated three outstanding scholars, economists, experts, and public servants to serve on the Federal Reserve Board and we applaud their willingness to serve.  Dr. Philip Jefferson, nominated to be the Vice Chair, and Dr. Lisa Cook, nominated for a full term, are current Governors, confirmed last year.  Better Markets strongly supported their nominations and confirmations last year and is pleased to do so again. 

This month, CFPB Director Rohit Chopra testified before the House and Senate as part of the CFPB’s Semi-Annual Report to Congress. The CFPB is under relentless attack from the financial industry and its allies in Congress precisely because it has been so effective at combating predatory and discriminatory practices across a broad range of firms, having returned $16 billion to victimized consumers. We highlight some of the CFPB’s accomplishments in our fact sheet.

“Wall Street wins largely because they are unopposed.”

- Dennis Kelleher for the documentary “Apes Together Strong,” featured in The New York Times

June 6
SEC’s crypto crackdown unlikely to affect traders in the near term but could transform the industry, analysts say

June 8
Proposed SEC cyber regulations draw mixed reviews

June 15
Atlanta Fed's Bostic acknowledges more financial disclosure issues

June 17
Is Crypto Dead?

Each month our legal team outlines some of the top cases we're keeping an eye on, the Amicus "Friend of the Court" Briefs we have filed, and why everyone with a bank account, credit card, mortgage loan, or retirement loan should be interested in those cases.  

In June, Capitol Hill witnessed a flurry of activities, including hearings on various topics such as the CFPB’s and the Fed's semi-annual reports, HFSC hearing on digital asset regulations, as well as a significant legislative markup in the Senate Banking Committee aimed at addressing the banking crisis.