Fed's Kashkari says banks arguing against regulation ‘make stuff up’

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U.S. regulators are going in the wrong direction when it comes to banks, and the arguments banks use against stricter requirements amount to nonsense, Federal Reserve Bank of Minneapolis President Neel Kashkari said.

“The big banks will make all sorts of nonsensical arguments that it’s holding back lending. It’s all nonsense,” Kashkari said Thursday during a virtual event hosted by New York University, echoing comments he made in a recent speech. “Their arguments are just — you just make stuff up and you hope people believe it,” he added.

Neel Kashkari, president and chief executive officer of the Federal Reserve Bank of Minneapolis, speaks during a discussion at the National Association for Business Economics economic policy conference in Washington on March 6, 2017.

Kashkari, who oversaw the 2008 bank bailouts as a then-Treasury official, has been outspoken in favor of higher capital requirements since he took over at the Minneapolis Fed in 2016. The U.S. central bank has instead relaxed some regulations since then under the direction of officials appointed to the Fed’s Board of Governors in Washington by President Trump.

“We are going in the wrong direction,” Kashkari said. “I think we should be tougher. I think we should have higher capital requirements on the biggest banks.”

The Minneapolis Fed chief praised Lael Brainard, the lone Fed governor to be appointed to her current position by President Barack Obama, for speaking out against the majority in favor of tougher measures. Brainard is reportedly under consideration as a possible future Treasury secretary if Democratic presidential nominee Joe Biden wins the Nov. 3 election.

Bloomberg News
Law and regulation Federal Reserve Federal Reserve Bank of Minneapolis Neel Kashkari Treasury Department Capital requirements