Home » Warren says big banks can use repository volatility to get rid of the liquidity rules they despise

Warren says big banks can use repository volatility to get rid of the liquidity rules they despise

Bloomberg
Senator Elizabeth Warren, Massachusetts Democrat and 2020 presidential candidate, has been a thorn in the largest banks

Senator Elizabeth Warren said that large banks can see volatility in the US short-term money markets recently as an opportunity to dismantle some of the capital rules established after the 2008 financial crisis, and warned the House White not to go ahead.

"Banks report earnings at record levels and it would be painfully ironic if unexplained chaos in a small corner of the banking market became an excuse to further loosen the rules that protect the economy," Warren, a Massachusetts Democrat and presidential candidate for 2020, he wrote in a letter to Treasury Secretary Steven Mnuchin last Friday.

She told Mnuchin that the Financial Stability Supervisory Board should not go along with the effort to ease the liquidity requirements of large banks, such as the liquidity coverage index.

"These rules were designed to ensure that banks have enough cash available to meet their obligations in the event of another market collapse," Warren said.

He pressed Mnuchin to report on what caused the increase in short-term loan rates last month and what implications they have for the markets.

She questioned the conventional belief that the increase was caused by a sudden lack of funds in the market due to quarterly tax payments and Treasury auction agreements.

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"These tax payments and settlements were no surprise and such a shortage of cash should have been anticipated long before the rate increase occurred," Warren said.

JPMorgan Chase JPM, + 1.03% CEO Jamie Dimon last week related the increase in repo-market rates with the post-crisis liquidity requirements.

Read: Dimon says the money market crisis runs the risk of becoming a crisis

Regulators have established a nest of capital rules without consulting each other or considering how they all interact, Dimon said in a discussion organized by the Institute of International Finance.

There could be a bigger financial crisis if liquidity measures are not optimized and better thought out, Dimon warned.

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Source: https://www.marketwatch.com/story/warren-says-big-banks-may-use-repo-market-volatility-to-get-rid-of-liquidity-rules-they-despise-2019-10-22

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