A Republican senator has assailed the Federal Reserve’s implementation of the Basel III capital rules as “extremely dangerous” and an impediment to economic growth in the US.
“I believe we are chasing Basel III, and it’s extremely dangerous,” said David Perdue, the junior senator from Georgia. “The rest of the world is not doing that. What we are doing is hammering our own ability to fund growth.”
Perdue also claimed US president Donald Trump shared his concerns: “I believe this is a crisis the president is fully aware of. He’s talked to me personally about it. He knows it, he gets it.”
Perdue was speaking at the International Futures Industry Conference in Boca Raton, Florida on March 16.
The implementation of the Basel III capital rules in the US has been co-ordinated by the Fed, which has at times adopted more stringent standards than those proposed by the Basel Committee – a process commonly referred to as ‘gold plating’.
For instance – in arguably the best-known example of gold plating – the Fed introduced a supplementary leverage ratio set at 5% for systemically important bank holding companies and 6% for insured depository institutions.
The Basel Committee on Banking Supervision’s original leverage ratio rule set the threshold at 3% of total assets.
“We have had a punitive regulatory regime the likes of which I have not seen in my lifetime. I have never seen the punitive nature of regulators the way we see it today,” said Perdue, who blamed the Obama administration for the situation. “And by the way, there are still rules being written that were adjudicated and determined under the last administration."
Perdue joins a growing list of Republican lawmakers who have publicly criticised the Basel Committee and the Fed’s co-operation with the international standard setter.
Representative Patrick McHenry, the Republican chairman of the House Committee on Financial Services, accused the Fed of “negotiating regulatory standards ... among global bureaucrats in foreign lands without transparency, accountability or the authority to do so” in a one-page letter he sent to Fed chair Janet Yellen on January 31.
“This is unacceptable,” McHenry wrote.
Perdue upped the ante further by asserting that Republican legislators – who control both chambers of Congress – could use the Congressional Review Act to overrule and repeal federal regulations.
“I believe the Congress has the opportunity – I don’t know if we’ll take it – through the Congressional Review Act to go all the way back to June last year and undo some of these onerous, unnecessary regulations that just poured at us during the last days of the last administration,” said Perdue.