Chair Powell Calls Basel III Re-Proposal “Very Plausible”

As expected, Republicans took turns grilling Chair Powell on the Basel III endgame proposal and calling for its withdrawal, and were likely pleased with the results. When questioned by Chair McHenry (R-NC) and Financial Institutions Subcommittee Chair Barr (R-KY), Mr. Powell stated that he expects “broad and material changes” to the proposal and stated that a re-proposal would be a “very plausible option,” calling the amount of negative comments regarding the proposal “unlike anything I have seen.”  Democrats made affordable housing their primary area of attack, following up on previous Democrat-led letters sent to Chair Powell calling for him to cut interest rates to reduce the burden on housing and construction costs.  Mr. Powell responded to housing concerns by acknowledging the structural housing shortage in the U.S. but reiterated the Fed’s dual mandate and stated that targeting the housing market is outside their jurisdiction.  In addition to monetary policy, much of the questioning also addressed fiscal policy, where Mr. Powell again attempted to stay aloof.  Ahead of today’s hearing, Chair McHenry and Subchair Barr led all HFSC Republicans in sending a letter to Mr. Powell, Chair Gruenberg, and Acting Comptroller Hsu demanding the regulators withdraw the capital proposal.  A bipartisan House coalition of 38 lawmakers led by Reps. Luetkemeyer (R-MO) and Williams (D-GA) also sent a letter to Mr. Powell criticizing the Fed’s proposal to reduce the debit-card interchange fee cap, warning of the proposal’s impact on LMI and underbanked communities.