In this report, FedFin assesses comment letters released to date from key policy-makers on the Basel NPRs (see FSM Reports CAPITAL185-187). Continuing his strong advocacy on financial regulation, former FRB Chairman Volcker pushed for a for higher leverage standard (perhaps eight percent). Echoing the sentiments of an earlier letter sent by a bipartisan coalition of 53 senators, legislators on both sides of the aisle focused almost exclusively on community banks. For example, Sen. Franken (D-MN) focused on the treatment of mortgages, while a collection of FinServ Republicans suggested the compliance burden could encourage banking consolidation and lead to larger financial institutions. Senate Banking Committee members Vitter (R-LA) and Brown (D-OH) in contrast described the benefits they saw for large banks, urging the rulemaking agencies to adopt a supervisory approach analogous to the one promoted by FDIC Director Hoenig premised on higher capital requirements, arguing that the largest banks need ratios as high as fourteen percent. Senate Banking Chairman Shelby (R-AL) also criticized the agencies for a lack of transparency, requesting that they provide various cost-benefit and quantitative analyses of the NPRs. As comment letters are still being posted, FedFin will continue to monitor the agencies and advise of any additional policy-maker input to this contentious rulemaking.
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