In this report, we assess FRB Vice Chairman Quarles’ appearance today before the Senate Banking Committee.  It was surprisingly more emotional than the House hearing earlier this week (see Client Report FEDERALRESERVE44), with Ranking Member Brown (D-OH) calling the eSLR change (see FSM Report LEVERAGE13) “shameful” in the strongest terms heard from him in recent memory.  Sen. Corker (R-TN) was almost as heated, urging that the changes to the SLR for custody banks in the Senate bill (see Client Report SIFI25) be dropped in conference.  Mr. Quarles was also pressed on liquidity relief for non-GSIBs by Sen. Toomey (R-PA); Mr. Quarles said that allowing all but the GSIBs to come under the modified LCR makes sense and indicated that the FRB is working on the specifics of tailoring the LCR pending action on the Senate legislation.  Sen. Toomey urged him to move ahead immediately because how and when the bill will proceed is unclear. As noted earlier, FRB Gov. Brainard today took strong exception to changing both the capital and liquidity standards, but Mr. Quarles today indicated that the Fed could go still farther and also raise the threshold for the advanced risk-based capital rules (see FSM Report CAPITAL201). Doubtless mindful of the “Operation Chokepoint” debacle, Mr. Quarles said that the FRB takes no stand on whether banks should finance guns or related products.

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