This is all sooo predictable.
Every time there’s a crisis, Washington overreacts and makes things worse. Last year Silicon Valley Bank and a handful of other banks collapsed because of bad investment decisions. So in response, the Fed Reserve and the FDIC want to raise capital requirements on ALL banks.
But wait, SVB, First Republic, and others WEREN’T undercapitalized. These new regs wouldn’t have stopped these bank’s loan losses.
What’s worse, the new rules are being pushed by unaccountable bureaucrats in Basel, Switzerland.
But a new study by CTUP’s Stephen Moore and former World Bank president David Malpass finds the rules are a disaster for the economy:
First, they will reduce the available pool of capital by an estimated $100 to $150 billion a year.
Second, the reduction in lending will reduce economic activity and thus shrink annual GDP by as much as 0.6%.
Third, because foreign banks are not subject to these regulations, American banks will lose competitiveness to foreign banks.
Fourth, and most importantly, it’s the little guy that gets squeezed out of the lending market. Small businesses and middle-income home buyers are most likely to be the ones whose loans are rejected as a result of these new rules.
The full study is available here: