We have a prime example of how excessive regulation strangles the economy. The FDIC and Federal Reserve bank regulators want to force banks to increase their capital requirements to prevent more bank failures, as we saw with Silicon Valley Bank earlier this year. But as a piece by CTUP co-founder Stephen Moore and David Bahnsen (top investment guru and a co-chair of the CTUP Economic Advisory Council) points out, this policy makes as much sense as telling physically fit and trim Americans to go on a diet in order to reduce obesity.
The new regs would have had NO effect on the SBV failure. But the higher reserve rules will require healthy banks to withhold more than $100 billion from their lending window to comply with the new rules. This will make it harder for new business start-ups to get loans and start-up capital to open their doors. Even the Fed’s own studies show that banks are NOT under-capitalized.
This rule would come at a time when America needs MORE, not LESS investment. How dumb can Washington be?