The U.S. Federal Reserve is considering a rule change that could save the country's eight largest banks combined billions of dollars in capital, in a potential long-sought win for the industry, according to four people with knowledge of the matter.
At issue is how the central bank calculates an extra layer of capital it imposes on U.S. global systemically important banks (GSIBs), known as the "GSIB surcharge," which it introduced in 2015 to boost their safety and soundness.
The Fed is considering updating inputs it uses in the calculation, which it fixed in 2015, to adjust for economic growth and in turn more accurately reflect the size of the banks relative to the global economy, the people said.
Updating those inputs or "coefficients" would reduce the banks' systemic scores and resulting capital surcharge, said the people who declined to be identified discussing private regulatory issues.
The Fed deliberations, which Reuters is reporting for the first time, are ongoing and no decisions have been made, the people said.
But the central bank's willingness to review the issue is major progress for GSIBs' years-long campaign to reduce the surcharge, which had gained little traction until recently. It also shows how a broader fight over capital rules is creating new opportunities for banks to push for other long-sought regulatory concessions.
The potential capital savings for the eight banks, which include JPMorgan, Citigroup and Bank of America, would depend on a number of factors, including their business models.
Together, the U.S. GSIBs held roughly $230 billion of capital on account of the surcharge in the first quarter of 2024, according to Fed data, suggesting even a small change could result in significant savings for some of the banks.
A 0.5% surcharge, for example, equals more than $8 billion each for JPMorgan and Bank of America, according to a Reuters calculation. That's cash banks say they could plow back into the economy through lending.
Spokespeople for the GSIBs, which also include Wells Fargo, Goldman Sachs, Morgan Stanley, BNY and State Street, declined to comment or did not immediately respond to requests for comment.
Introduced as a result of the 2009 global financial crisis, the surcharge aims to boost GSIBs' resilience given the threat they pose to financial stability.
When adopting the rule, the Fed said it was fixing the coefficients, which relate to a bank's size, interconnectedness, complexity and cross-border activity, using 2012-2013 data.
Editor’s note: “Dr. Miller reminds us that if Democratic Party leaders had heeded his message when this was published in September 2021, they would have had plenty of time to find a suitable replacement. They instead hid the problem and are now panicking.”
As both a baseball fan and an observer of politics, I often hark back to Yogi Berra’s memorable quip, “It’s tough to make predictions, especially about the future.” However, I think I nailed it in this concluding paragraph of an April article:
One thing is for certain; we can expect to see continuing validation from President (Joe) Biden of the old quip, ‘How can you tell when a politician is lying? His lips are moving.’ But in the same way that you can’t take your eyes off a train wreck in progress, it will be fascinating to see whether the salient feature of Biden’s presidency will be his mendacity or his dementia — or some incendiary admixture of the two.
It seems clear that we’re seeing the effects of both.
First, some recent examples of Biden’s ongoing unfamiliarity with the truth. His insistence that there was “unanimity” among his civilian and military advisers about the disastrous plan to withdraw U.S. troops from Afghanistan and about the “success” of his border and immigration policies is patently absurd. Military leaders understand how to conduct strategic withdrawals, and our southern border leaks like a sieve. The president’s Sept. 24 comments about the costs of the massive “infrastructure” legislation favored by the administration were both ludicrous and barely coherent, both of which are current Biden trademarks:
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“We talk about price tags. The – it is zero price tag on the debt. We’re paying – we’re going to pay for everything we spend. So they say it’s not – you know, people, understandably – ‘Well, you know, it started off at $6 trillion, now it’s $3.5 trillion. Now it’s – is it going to be $2.9? Is it …’
“It’s going to be zero – zero. Because in the – in that plan that I put forward – and I said from the outset – I said, ‘I’m running to change the dynamic of how the economy grows.’”
A zero price tag? As Gerard Baker observed in a Wall Street Journal column, “The Biden bill is paid for by the largest tax increase in history. You are entitled to argue that is a cost worth paying, but you can’t argue it costs nothing.”
The Babylon Bee offered this amusing take on the Biden claim:
None of this should be unexpected. Biden’s pronouncements on Georgia’s new voting rights law earlier this year are yet another example. At a news conference on March 25, the president remarked, “What I’m worried about is how un-American this whole initiative is. It’s sick. It’s sick … deciding that you’re going to end voting at five o’clock when working people are just getting off work.” The next day, the White House issued a statement on his behalf regarding “the Attack on the Right to Vote in Georgia.” “Among the outrageous parts of this new state law, it ends voting hours early so working people can’t cast their vote after their shift is over,” it read.
Although Georgia’s new law did make some changes to early voting, experts consulted by the Washington Post (a paragon of the left-wing mainstream media, remember) said that “the net effect was to expand the opportunities to vote for most Georgians, not limit them.” The Post awarded Biden its highest mendacity rating: Four Pinocchios.
The same disdain for the truth also pertains to the president’s pronouncements about his proposed policies – especially the promise to “Build Back Better” for American workers. Contrary to his claims, according to an editorial in the Wall Street Journal, the proposed tax increases on corporations “would reduce the after-tax return on investment and make U.S. companies less competitive globally with the highest combined state-federal corporate tax rate in the developed world.”
The Journal concluded that “lower profits mean slower wage increases for workers and higher prices for consumers to make up for higher costs,” which gives the lie to Biden’s repeated claims that he’s the champion of the middle class.
Dissatisfaction with the Biden administration’s style and substance is reflected in the polls. As recently as June, 56% approved of the president’s performance, while only 40% disapproved. By August, the approve/disapprove numbers were essentially equal: 49%/48%. And as of the week of Sept. 19, according to new Gallup numbers, Biden’s job approval was at just 43% while a majority – 53% – disapproved.
To anyone who has followed Biden’s political career, this is part of a pattern. Over several decades, he has become infamous for gaffes, blunders … and lies. And eventually, the habit of lying began to overlap with clear evidence of cognitive decline.
In 1987, during the first of his multiple bids for the presidency, then-Sen. Biden famously plagiarized part of a campaign speech from one by Neil Kinnock, who was then the leader of Britain’s Labour Party, even revising his own family history to conform to the speech. Biden, who once faced disciplinary action for plagiarizing part of a law school paper, claimed that same year that he “went to law school on a full academic scholarship – the only one in my class to have a full academic scholarship” and that he “ended up in the top half” of his class. At one point, he had boasted that, in college, he was “the outstanding student in the political science department” and “graduated with three degrees.”
After the flagrant inaccuracies in his statements were exposed, Biden made this admission on Sept. 22, 1987: “I did not graduate in the top half of my class at law school, and my recollection of this was inaccurate.” He actually graduated 76th out of a class of 85 from the Syracuse College of Law, and in college, received a single bachelor’s degree.
Understandably, his presidential campaign hopes were dashed – for the 1988 bid – but as a prevaricator, he was just warming up.
Since that gaffe, Biden, who is now 78, has increasingly fumbled and bumbled in his public remarks. His then-boss, President Barack Obama, reportedly was none too happy about it. According to the authors of “Game Change,” Obama asked angrily, “How many times is Biden gonna say something stupid?” Obama administration national security official Ben Rhodes wrote in his memoir that “in the Situation Room, Biden could be something of an unguided missile.” And, of course, Biden’s performance during the 2020 presidential campaign was generally lackluster, lethargic, and replete with gaffes and misstatements.
Biden’s cognitive decline is worsening. He frequently mumbles and slurs his speech, and in March, the leader of the Free World forgot not only the name of his own defense secretary, but also the name of the building (the Pentagon) in which the headquarters of the Department of Defense is located. And during his first press conference as president, Biden had to have on the podium cheat sheets with detailed answers to questions he would likely be asked. It’s no surprise that aides provide him a list of which White House reporters to call on during press conferences and truncate his unscripted appearances.
As a physician, I strongly suspect a connection between Biden’s cognitive decline and the acceleration of his dissembling and bumbling. People who are suffering from dementia often make up things to fill gaps in their memory and ability to reason. Then again, it could just be that a long and illustrious career of lying is hard to shake off.
Treasury SecretaryJanet Yellen calledPresident Biden “extremely effective” amidgrowing callsfor him to step aside after a poor showing in his first presidential debate against former President Trump.
Rep. Mike Lawler (R-N.Y.) asked Yellen during a House committee hearing if she had “noticed any mental or cognitive decline” in any of her meetings with Biden.
“The president is extremely effective in the meetings I’ve been in with him. That includes many international meetings that are multi-hour like his meetings with President Xi [Jinping of China],” Yellen said Tuesday during an annual hearing with the House Financial Services Committee on the international financial system.
The Treasury secretary declined to answer Lawler’s question about the last time she met with the president.
“I’m not going to comment on my meetings with the president. Those are private,” Yellen said.
Yellen also offered a single “no” when Lawler asked if there had been any discussion among Biden’s cabinet about invoking the 25th Amendment, which would allow a majority of the Cabinet to transfer powers from the president to the vice president if they believe they are unable to perform their duty.
The line of questioning prompted a gentle rebuke from Rep. Blaine Luetkemeyer (R-Mo.), who chairs the Subcommittee on National Security, Illicit Finance and International Financial Institutions.
“Just a reminder to the committee that getting into the personal business effects of the president as well as Mr. Trump is inappropriate for this committee,” Luetkemeyer said.
Biden sparked alarm among Democratic lawmakers, allies and donors when he fumbled his words and struggled to string together responses at points during the debate.
While Democratic leaders have stood by the president, several House Democrats have called on the president to step aside as Trump has widened his lead over the president in the days since the debate.
The White House and campaign have pushed back on calls for Biden to drop out, saying the past three and a half years of his presidency should squash any concerns that stem from a 90 minute debate.
Trump currently has a 58 percent chance of winning the presidency, according to a forecast by The Hill and Decision Desk HQ. The incumbent has also been struggling to buck negative perceptions of his handling of the economy and win over voters who are upset about how he has handled the humanitarian crisis from the war between Israel and Hamas.
President Biden’s fitness for office will be put to the test this week during the NATO summit he is hosting in Washington, a high-stakes endurance test that gives the president an opportunity to push back on critics saying he is too old for a second term.
But the frantic debate over Biden’s future — as he tries to contain the fallout from his alarming debate performance last month — risks overshadowing an event aimed at projecting strength against threats from Russia and China.
“Journalists attending President Biden’s summit press conference will likely not ask one question about NATO but instead ask about the president’s political future,” said Jim Townsend, a former senior Pentagon official focused on NATO policy and a current adjunct senior fellow with the Center for New American Security.
Biden has been defiant in the wake of increasingly public calls from Democratic lawmakers to drop out of the race and widespread concern behind closed doors that the president is too frail to mount a campaign against former President Trump in the November election.
“I’m running the world,” Biden said during an interview with ABC’s George Stephanopoulos on Friday — a 22-minute conversation that did little to dispel concerns over Biden’s fitness for office but did offer the president an opportunity to defend his record of leadership on the global stage.
“We are the essential nation of the world,” he said.
The NATO summit, beginning Tuesday and taking place over three days in Washington, D.C., will focus on demonstrating the alliance’s enduring support for Ukraine in its defensive war against Russia, and signaling deep ties in the Indo-Pacific to counter Chinese President Xi Jinping’s designs on subsuming Taiwan.
Biden is credited with uniting allies in the face of Russian President Vladimir Putin’s full-scale invasion of Ukraine in February 2022 — a comprehensive effort that has so far endured through more than two years of war.
But Biden’s June 27 debate with Trump spurred panic among even ardent supporters, as the president failed to match Trump’s energy, speaking with a weak, raspy voice and trailing off on numerous answers.
“He’s under a microscope,” Rep. Jim Himes (D-Conn.), the ranking member of the House Intelligence Committee, told The Hill.
While Himes acknowledged there’s a very real debate going on in the Democratic Party on the way forward for November, he said he didn’t think questions about Biden’s fitness for office would overshadow the summit.
“There’s a shooting battle in Ukraine right now on the edges of NATO. I think that’s the priority of the summit; I hope everyone will keep their focus there.”
White House national security communications adviser John Kirby brushed off a question Monday about whether Biden’s poor debate performance late last month would cause trouble with allies, saying it “presupposes the notion that they need to be reassured.”
“I don’t believe that’s the case,” he said. “We’re not picking up any signs of that from our allies at all.”
And Kirby sought to put the focus back on Ukraine, saying announcements throughout the summit will include new commitments for air defense support for Ukraine, deterrence capabilities to boost NATO and investments in the defense industrial base, including domestically in the U.S.
He said leaders would also reaffirm that there is a path for Ukraine to join NATO in the future.
But Biden’s presence at the podium and his interactions with world leaders are going to be under close scrutiny as his campaign seeks to convince skeptical Democrats in Congress to stand by him as they return this week from recess.
The president is expected to meet with newly elected British Prime Minister Keir Starmer on Wednesday, and he will host a dinner with NATO allies beginning at 8 p.m. local time — a counter to Biden’s reported comments last week to Democratic governors that evening events tend to tire him out.
On Thursday, Biden will begin a day of meetings at 10 a.m. with NATO allies, and hold a press conference at 5:30 p.m.
Other high-profile events include the president hosting Ukrainian President Volodymyr Zelensky and nearly two dozen NATO allies who have signed bilateral security agreements with Kyiv.
“While the president will have quite a busy schedule, given his commitment as a host of the summit, we’re working to set up several [bilaterals] and meetings with various world leaders on the margins of the summit, including President Zelensky,” a senior administration official said in a call with reporters previewing the summit.
The summit is also viewed as laying the groundwork to protect the alliance and its support for Ukraine against a potential Trump reelection in November.
While the U.S. is viewed as an indispensable partner and the de facto leader of the alliance, allies are confronting the reality that Trump may win in November, and the possibility that he could follow through on threats to withdraw from the alliance or hold back U.S. commitments to the Article 5 mutual defense agreement.
“It is possible that a future U.S. administration will substantially reduce its traditional level of leadership and support for the alliance because of a shift in American domestic politics or a conflict in Asia that consumes U.S. attention and resources,” Karl P. Mueller, senior political scientist with the RAND Corporation, said of the challenges facing NATO.
Gian Gentile, associate director of the RAND Corporation’s Arroyo Center, added that “U.S. domestic politics” is a major challenge for the alliance.
“The alliance will have to improve cohesion among NATO states in their aim to help Ukraine win the war,” he said.
A joint communique issued at the end of the summit is expected to lay out how NATO is taking on a bigger leadership role in coordinating support for Ukraine — concerned that a second Trump administration would cut back or end robust U.S. military and economic support for Kyiv.
This includes NATO establishing a command post in Germany to coordinate weapons deliveries among approximately 50 of Kyiv’s supporters — an initiative currently led by the U.S. and called the Ramstein grouping.
The alliance will also seek pledges from allies to sustain their current level of funding for the next year, and seek to establish a consensus on a baseline of future financial support.
“These are agreed NATO commitments to deliver on something which is more accountable and more capable,” Jens Stoltenberg, the outgoing NATO secretary-general, said in a roundtable with reporters Sunday.
