While it’s true that the largest banks currently look solvent in the face of economic stress, this is in significant part because they have benefited greatly from regulatory forbearance and from Federal Reserve intervention in financial markets. This report, based on analysis of regulations and bank financial reports by Americans for Financial Education Fund and Risky Finance, lays out some of the clearest ways in which the nation’s six largest banks have benefited from regulatory forbearance and the Federal Reserve’s financial market interventions.
On Oct. 19, AFR Executive Director Lisa Donner participated in a virtual conference organized by the Federal Reserve Bank of Minneapolis. Entitled “Empowering the public to assess large bank resiliency, the conference brought together leading experts to bank transparency to discuss how to maintain and improve transparency of the conditions of major banks.
Reproduced and linked below is an AFR Education Fund memo on issues around the design of a national public investment bank that would be a modernized successor to the Reconstruction Finance Corporation. Link to pdf document: Policy memo on public investment bank – working draft
The private equity industry, seeing a window of opportunity following the onset of the pandemic, has taken it upon itself to have the companies that it owns issue at least $10 billion in debt solely for the purpose of paying itself. This is yet another example of private equity looting.
A group of financial reform, labor, and public interest organizations today warned the Federal Reserve not to water down rules that limit the access of companies owned by private equity firms to emergency lending facilities created during the COVID-19 pandemic. Allies of the industry have pressed the Fed to loosen the affiliation rules for its new Main Street Lending Facility, a step that would ease the way for private equity to access public money despite its ready access to capital markets and uninvested capital.
“The failure to effectively control underwriting standards is one more example of ‘heads they win, tails we lose’ support for Wall Street.”
LETTER TO REGULATORS: Poor Underwriting Standards in Federal Reserve Emergency Lending Programs Could Lead to Support for Insolvent Firms
You can view or download the letter here.
Now that Wall Street is reporting earnings for a quarter that took place entirely during the coronavirus pandemic, it is clear that the Federal Reserve has bailed out the bankers quite effectively. Workers, families, small businesses, states, and municipalities have not fared nearly as well.
States and localities provide critical public services, and more than 1.5 million state and local jobs have been lost since February. Without credit support like that which should be provided by this Facility, deeper job losses and service cuts can be expected as states grapple with unprecedented fiscal challenges in the face of the coronavirus crisis. Supporting states and localities is critical for economic recovery and for assisting communities impacted by the dual public health and economic crisis we face.
The AFR Education Fund wrote a letter to the Federal Reserve calling on them to let smaller public and municipal borrowers access the Main Street Lending Program which supports bank loans to businesses and non-profits. This would assist the many public borrowers who cannot issue