$JPM #2 / Where Dodd-Frank Should Go from Here CON
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Posted On: 04/23/2017 2:27:14 PM
$JPM #2 / Where Dodd-Frank Should Go from Here CONGRESS HAS TO ACT
Again, I would not argue that Dodd-Frank should be wholly removed.
But I think the best we can hope for is a thorough analysis for understanding what rules worked effectively, keep those, and then consider removing the rules that aren’t working and that are inhibiting fundamental bank functions, like lending.
$JPM
For example, at J.P. Morgan they have over $30 billion in capital reserves that Dimon refers to as “permanently idle capital,”
because not only can the bank not lend or invest that money – they can’t do anything with it.
Such is the case for about $2.5 trillion in excess reserves parked at
banks today. Some statutes in Dodd-Frank require banks to maintain
certain capital ratios
– which is important
– but it is arguably a bit overreaching.
Perhaps a modification is in order to loosen controls over how banks use their liquidity and capital.
Many banks surveyed say that reducing such requirements would
encourage them to lend more, which is one of the basic engines of economic growth.
There is a long road ahead. Legislative action is required to overturn laws,
so even if Congress was fully committed and unified for deregulation and reform, it must take the slow and arduous path to tweaking the law. So far,
Congress’s ability to accomplish such a feat has been less than convincing. There was not even a vote on the
American Healthcare Act.
And, given the administration’s higher priorities of tax reform and immigration, it is likely wishful thinking to assume that change will come fast.
Again, I would not argue that Dodd-Frank should be wholly removed.
But I think the best we can hope for is a thorough analysis for understanding what rules worked effectively, keep those, and then consider removing the rules that aren’t working and that are inhibiting fundamental bank functions, like lending.
$JPM
For example, at J.P. Morgan they have over $30 billion in capital reserves that Dimon refers to as “permanently idle capital,”
because not only can the bank not lend or invest that money – they can’t do anything with it.
Such is the case for about $2.5 trillion in excess reserves parked at
banks today. Some statutes in Dodd-Frank require banks to maintain
certain capital ratios
– which is important
– but it is arguably a bit overreaching.
Perhaps a modification is in order to loosen controls over how banks use their liquidity and capital.
Many banks surveyed say that reducing such requirements would
encourage them to lend more, which is one of the basic engines of economic growth.
There is a long road ahead. Legislative action is required to overturn laws,
so even if Congress was fully committed and unified for deregulation and reform, it must take the slow and arduous path to tweaking the law. So far,
Congress’s ability to accomplish such a feat has been less than convincing. There was not even a vote on the
American Healthcare Act.
And, given the administration’s higher priorities of tax reform and immigration, it is likely wishful thinking to assume that change will come fast.
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