Bank Capital is Good. A Truly Independent Fed Would Be Too

Capital is boring. Boring is good. Especially when world-spanning banking behemoths are concerned.

In short: A strong enhanced supplementary leverage ratio (eSLR) helps keep globally systemically important banks (GSIBs) safe. Without the polysyllabic jargon: When the eight U.S. banks whose tremors are big enough to rattle the globe are required to meet strong capital requirements in order to avoid insolvency and failure, everyone is safer for it, starting with the banks themselves.

Capital is effectively a measure of how much buy-in a bank has from its shareholders, and reflects the difference between its assets and liabilities. In other words, capital represents “uncommitted” funds and “does not have to be paid back.” That’s what makes capital a safety cushion: The more capital, or investment from its shareholders, the more shocks it can absorb. The eSLR, versus the standard SLR, has traditionally pushed GSIBs — this inner circle of supermassive banks (JP Morgan Chase, Citigroup, Bank of America, Goldman Sachs, BNY Mellon, Morgan Stanley, State Street, and Wells Fargo) — to have relatively more capital on-hand than their smaller counterparts.

In July, the Fed, OCC and FDIC floated a dangerous proposal that would weaken standards around capital. The rule would significantly weaken the eSLR, one of the most important post-2008 bank-safety guardrails, by drawing requirements down by an estimated $213 billion. AFREF strongly opposes the decision, writing that it would “increase the likelihood and severity of financial crises that pose significant risks to the real economy, communities, and families”:

Reducing these equity cushions makes failures more likely, increases the chances of bailouts, and exposes the financial system, the economy, and the public to greater risk…These risks are compounded by the broader deregulatory agenda that undermines the independence of financial regulators, cuts supervisory staff, and weakens tools for monitoring and responding to systemic risks.

Sens. Warren and Sanders criticized big bank CEOs for using any existing gains from lower capital requirements to line their executives’ pockets: “When (your bank’s) capital declines, its susceptibility to economic shocks and likelihood of failure increases. Yet, contrary to the rhetoric of your lobbyists, you have not used the full amount of your reduced capital buffer requirements to increase lending or improve pricing for customers. The lower capital requirements, instead, clearly allowed (your bank) to boost buybacks and dividends.”

The capital issue, and others, raises concerns about the need for the Federal Reserve to remain independent of political influence — including from a White House captured by Wall Street. (The Fed has its own challenges with banker influence, but that’s another story.) The Trump Department of Justice has launched an investigation into whether Fed Governor Lisa Cook provided fraudulent information on mortgage applications related to properties in Ann Arbor, Michigan and Atlanta, Georgia.

Said AFR’s Patrick Woodall:

President Trump’s unlawful attempt to purge the Federal Reserve Board of anyone who disagrees with him is an abuse of power that threatens the foundation of our democracy, as have so many of his actions already.

No president in U.S. history has pursued their political enemies so recklessly, and this brazen attempt to coerce the Federal Reserve undermines the rule of law and threatens economic stability. It is also another racist dog whistle that undermines the legitimacy of Black women (and all people of color) in positions of power. Once again, the Trump administration is weaponizing the federal government against officials who are not obvious loyalists.

Congressional leaders have lambasted the effort. Ranking Member Rep. Maxine Waters called it a “brazen and racist” attempt to “undermine the independence of the Federal Reserve and bend it to Donald Trump’s will.”

Related: The Fed issued new capital requirements for 31 of the largest financial firms, based partly on each individual bank’s summer stress test results.

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BANKING AND FINANCIAL STABILITY: No Bank Exams? – Hiding Risk
CONSUMER: Ignoring the Red Flags – Consumers to Rely on States – Medical Debt – Credit Card Caps – Open Banking?
CAPITAL MARKETS: Anti-ESG Bills – Executive Compensation. – Who Knows Who Owns What? – Take Back Tesla.
PRIVATE MARKETS: PE Can’t Raise Money. – PE & Homecare. – California & PE. – Riskier than PE Admits. – Your Retirement.
CRYPTO: Weakening the Watchmen. – Stablecoins = Taxpayer Bailouts. – The Trump Family Fortune. – Senate Democrats Release Crypto Market Reg Wish – Everything Everywhere All at Once.
HOUSING: The Housing Crisis.
CLIMATE AND FINANCE: Climate Risk
POLITICS AND MONEY: Crypto Cash. – Blackstone Hearts Collins.

Feedback? Reach us at afrnews@ourfinancialsecurity.org

BANKING AND FINANCIAL STABILITY

No Bank Exams?

Under President Trump’s administration, U.S. bank regulators — notably the OCC, Federal Reserve and CFPB — have begun cancelling or scaling back bank examinations, especially in areas like climate risk, reputational risk, and diversity and inclusion. They’re also replacing formal “matters requiring attention” disciplinary letters with softer, informal guidance, and narrowing their supervisory scope to capital, liquidity, and traditional financial‐safety metrics. Staff cuts and hiring freezes are also driving part of the pullback, but critics warn that reduced oversight could leave banks more exposed to systemic risks.

Hiding Risk

Regulators have made it easier for banks to hide signs of trouble brewing in their loan portfolios, due to changes in disclosure requirements. Previously, a decades-old standard required that banks report the total amount of troubled loans whose terms they had to modify to keep repayers from falling behind. Now, they only have to look back 12 months. Some analysts say the time horizon is too short, since loans are typically only considered “clean” if they have had payments for over 24 months.

CONSUMER

Ignoring the Red Flags

On August 15, the U.S. Court of Appeals allowed the Trump administration and Acting Director Russ Vought to continue dismantling the CFPB, the consumer watchdog that has long provided billions of dollars in relief to consumers harmed by financial actors. The CFPB union has 45 days to appeal.

Said AFR’s Kimberly Fountain:

At a time when rising costs are impacting people’s ability to secure housing, food, and other basic needs, an effective CFPB stopping rip offs and junk fees and making lawbreaking financial companies pay people back money they have taken wrongfully is more important than ever. Gutting the agency responsible for holding predatory financial companies accountable – as Trump and Vaught are trying repeatedly to do – will only make it easier for Wall Street and big banks to take advantage of people without consequences.

Related: Even more job cuts are looming as Republican budget cuts point to a possible “reduction in force (RIF) action.”

As the firings threaten the agency, Vought’s CFPB has closed out nearly all of the 2,000 regulatory “matters requiring attention” previously raised by its bank examiners. MRAs are red flags that indicate when a company has compliance issues. Staffers have been putting together “death memos” to zero out any remaining MRAs.

Consumers to Rely on States

Mass deregulation at the CFPB, which will eliminate dozens of Biden-era rules, will let hundreds of corporations and financial institutions that were under investigation off the hook, leaving the millions of people that relied on the agency out of luck. Wrote AFR’s Amanda Jackson:

For years, the CFPB has been a vital shield against scams and schemes that target middle- and lower-income families. Its mandate – to ensure everyone has access to financial products that are transparent and competitive – is one of the key lessons drawn from the greed and recklessness that fueled the 2008 financial collapse. That promise is now broken, and predatory financial companies will have a green light to exploit struggling consumers and silence the agencies brave enough to call out wrongdoing.

As a consequence, state governments are forced to pick up the feds’ slack. At least 16 states, Bloomberg reports, have moved to boost consumer financial protections, including by taking up one of the CFPB’s former battles: curbing junk fees. But the Center for Responsible Lending’s Whitney Barkley-Denny warns that states are not likely to be able to fully replicate what the CFPB was capable of.

Medical Debt

A federal judge in Texas, Judge Sean Jordan, a Trump appointee, has vacated a Biden-era CFPB rule that would have removed medical debt from consumer credit reports, ruling that the CFPB exceeded its authority under the Fair Credit Reporting Act. The regulation, finalized in January 2025, had been expected to raise credit scores by about 20 points for approximately 15 million people and eliminate nearly $49 billion in medical debt. Advocates warned that keeping medical bills on credit reports unfairly penalizes individuals, especially in the wake of unplanned medical emergencies, and can block access to essentials like mortgages and affordable loans.

Credit Card Caps

A new Vanderbilt University study finds that capping credit card interest rates at 10 percent, a policy Donald Trump floated during his 2024 campaign, could save Americans about $100 billion a year in interest charges. Even at a 15 percent cap, consumers would save around $48 billion annually, with banks remaining profitable due to interchange fees. While some rewards programs could shrink for riskier borrowers, most perks would continue for lower-risk consumers. The proposal, despite opposition from banks, has drawn bipartisan support in Congress from lawmakers, including Sens. Bernie Sanders and Josh Hawley, and Rep. Alexandria Ocasio-Cortez.

Open Banking?

The CFPB has reopened its Section 1033 open banking rule, issuing a 13-page notice to revise, rather than scrap, the regulation. The move follows JPMorgan Chase’s proposal to charge for data access, which alarmed current and potential fintech competitors. The CFPB is now seeking feedback on whether banks can impose such fees, who qualifies as a consumer’s representative, data security standards, and liability in the case of breaches. The CFPB also extended the compliance timeline, with the rule now set to take effect by mid-2026, and opened a 60-day comment period as it works toward finalizing changes by year’s end.

CAPITAL MARKETS

Anti-ESG Bills

The House Financial Services Committee noticed a set of bills that would benefit corporate boards and executives by weakening investor protections, reducing transparency, and making it even more difficult for shareholders to hold corporations accountable, including by curbing shareholders’ ability to file proposals about important issues that affect their investments, such as those surrounding climate change, labor relations, racial discrimination, and more.

In a letter opposing the bills, AFR wrote:

The real threat to corporate governance comes from a race to the bottom in state corporate law triggered by Elon Musk, as well as from other players in the corporate governance ecosystem that are consolidating power over corporate decision-making — not from minority shareholders trying to get their voices heard on important issues through shareholder proposals that are generally non-binding.

Executive Compensation.

On August 6, 2025, AFREF submitted a letter to the U.S. Securities and Exchange Commission defending robust executive compensation disclosure standards. This action responded to the SEC’s June 26 roundtable, which revisited and threatens to unravel the current compensation disclosure framework.

Who Knows Who Owns What?

FinCEN’s beneficial ownership reporting requirements once pushed U.S. companies and foreign companies operating in the United States to reveal the identities of the true owners behind their obscure corporate entities and shell companies. Millions of companies submitted information before the January 1, 2025 deadline. In March, FinCEN removed requirements for U.S. companies and extended the compliance date for foreign companies. Now, the Treasury has announced that it will wipe all of the data it collected on U.S. businesses. In combination, these two moves are a giant step backwards for transparency and a total giveaway to the corporate bad actors hiding behind a thicket of shell companies.

Take Back Tesla.

On August 22, 2025, AFR and a coalition of labor and advocacy groups urged state financial officers overseeing pension funds invested in Tesla to oppose excessive pay packages for Tesla CEO Elon Musk, warning it would put workers’ retirement savings at unnecessary risk and undermine corporate accountability. The letter came after the board bypassed shareholders altogether by awarding Musk a $29 billion “interim” pay package that would give him –– already the richest man in the world –– more money in a single year than the CEO of Google would make in 810 years. Since then, Tesla has announced a pay package for Musk that could be worth around $1 trillion. In response, AFR’s Natalia Renta noted: “His own median worker is making $57,000 while he is awarded a pay package that could add up to $1 trillion by being a part-time C.E.O. It’s just very outrageous.”

PRIVATE MARKETS

PE Can’t Raise Money.

In the 12 months leading up to June, the private equity industry raised the least amount of money it had in seven years. High interest rates and recent difficulties in selling off companies they no longer want and in returning money to investors have made existing and prospective investors wary about putting any more money into PE funds.

Amid the downturn, the CFO of private equity megafirm KKR foresees more consolidation among private equity firms themselves.

PE & Homecare.

In an “abdication of responsibility,” New York state handed to a private equity-backed company a contract that allows it to administer services related to Medicaid home health care. The transition to Public Partnerships LLC (PPL), the company backed by DW Healthcare Partners and Linden Capital Partners, was expected to save Medicaid money. But 80,000 recipients have since switched to more expensive services from licensed providers. Those that remain have found it difficult to hire the home health they need, as PE-owned chains have increasingly scooped up home and community-based services companies. (See AFR’s report on home care and private equity for more.)

California & PE.

California lawmakers have sent a bill to Governor Newsom’s desk that would require private equity firms to notify the state’s Office of Health Care Affordability if they plan to merge or acquire healthcare entities. Between 2019 and 2023, private equity healthcare transactions represented a third of all healthcare deals in the state. Even so, Governor Newsom vetoed a similar bill last year.

Riskier than PE Admits.

A lot of the time, private equity offers returns that are just too good to be true. Morningstar’s Larry Swedroe scrutinizes how PE often understates or hides the actual risk in their investments through what some call “volatility laundering.” Since private equity measures the valuations of its holdings quarterly, they rely on assumptions instead of actual market pricing, Swedroe writes, making their returns look more consistent and hence more attractive to investors. In reality, the characteristics that make private equity firms what they are — smaller size, higher leverage, less diversification — should make them riskier and more volatile. And whatever benefits they do provide are often smaller than advertised to prospective investors.

Your Retirement.

A coalition of watchdog groups warns that a Trump administration executive order paving the way for private equity to access 401(k) and other retirement accounts jeopardizes worker financial security by exposing millions to high-risk, opaque, and fee-heavy investments.

As AFREF analyst Oscar Valdés Viera puts it, “Our 401(k)s should remain a source of security for workers and not act as a bailout fund for Wall Street’s riskiest bets.”

Simultaneously, AFT President Randi Weingarten denounces the move: “Private equity has a track record all right: one of extracting huge fees from our members’ retirement savings and with zero transparency and disappointing returns.” A joint AFT–AFREF report reveals that private equity underperforms over time, manipulates return metrics, and burdens investors with costly fees, while firms themselves face declining fundraising and performance. This regulatory shift to let PE into retirement savings accounts appears driven by industry interests rather than saver demand.

AFR’s Chloe Rogers cautions that retirement accounts “are supposed to be the safest money you’ll ever have — not a roll of the dice.” She warns that opening them to private equity makes ordinary savers “easy prey,” saddled with opaque, illiquid investments and “fees on top of fees.” Even elite investors like Yale have cooled on private equity after years of disappointing results: a sign that “we should think twice before letting Wall Street gamble with workers’ golden years.”

CRYPTO

Weakening the Watchmen.

While Republicans are wont to punt new crypto regulation responsibilities onto the Commodity Futures Trading Commission (CFTC), the agency’s staff “describe chaos, cutbacks and an atmosphere of resentment and paranoia” at their workplace. Reductions in staff — especially at the agency’s enforcement division — and in spending on tools related to crypto investigation have prompted questions about whether the CFTC will be able to perform its statutorily required oversight of the commodities and derivatives markets or keep up with its new obligations outlined in the pending crypto market structure legislation like the CLARITY Act. CLARITY passed the House this summer, and the Senate is currently contemplating its own version of market structure legislation. AFR has warned that if they pass similar legislation, senators will be “complicit in [a] new virulent shade of corrupt crypto cronyism.”

Stablecoins = Taxpayer Bailouts.

In a recent warning, Nobel laureate Jean Tirole cautioned that stablecoins, digital tokens often perceived as safe assets, pose hidden risks to retail investors and could trigger taxpayer bailouts if governments feel compelled to rescue depositors during a crisis, as uninsured users stand to lose substantial sums. Without robust global supervision — something Tirole notes is uncertain due to limited resources and conflicting political and financial interests — such digital assets could undermine financial stability. He emphasized that “if it is held by retail or institutional depositors who thought it was a perfectly safe deposit, then the government will be under a lot of pressure to rescue the depositors”

The Trump Family Fortune.

The Trump family scored an estimated $5 billion paper fortune after their crypto venture, World Liberty Financial, launched public trading of its $WLFI token, according to the Wall Street Journal. The token’s trading price opened at near $0.30 apiece before slipping toward $0.20, valuing the family’s locked stake at several billion dollars. The debut followed a complex deal in which World Liberty took over a listed company and raised $750 million to buy the token, potentially earning the Trumps around $500 million since they retain up to three-quarters of sales revenue. $WLFI now appears to be the Trump family’s most valuable asset, alongside holdings in the $Trump memecoin and Trump Media. Critics warn the venture may give investors leverage with the White House, noting how Binance’s support for World Liberty’s USD1 stablecoin, as its founder seeks a pardon, suggests similar pay-to-play politics, though both the White House and company deny conflicts.

Senate Democrats Release Crypto Market Reg Wish List.

A recent Axios report says a group of 12 Senate Democrats, including Mark Warner, Kirsten Gillibrand, Cory Booker, and Ruben Gallego, have outlined their priorities for new crypto rules. They want clearer standards for how digital coins are created and traded, stronger consumer protections, and quicker oversight of trading platforms by the SEC. Their plan also calls for exchanges to register with federal agencies to help curb money laundering and for more staff and funding at both the SEC and CFTC. The proposal shows Democrats are getting more specific about how they hope to guide the fast-growing crypto market and could shape talks over a broader bill. But the jury is out on whether the signatories will fight to uphold these principles — which show some promise — or cave to industry pressure and Republican stonewalling and accept half-measures instead.

Everything Everywhere All at Once.

A September 4 piece says the SEC and CFTC, backed by the Trump administration, are advancing measures to provide the crypto industry with light-touch regulatory pathways faster than Congress. While lawmakers debate the CLARITY Act and other market structure proposals to define “digital commodities,” regulators are already easing crypto rules: the CFTC is letting exchanges register for spot trading and list perpetual futures, and SEC Chair Paul Atkins’s “Project Crypto” promotes tokenization and a one-license “super-app” model. A joint statement by the two agencies further blurred securities-commodities boundaries, allowing leveraged or margined spot deals on federally registered exchanges. These moves give the industry much of its wish list, which could sideline efforts to advance legislation but could still cement a permissive framework that may be hard to roll back.

HOUSING

The Housing Crisis.

“Everyone under 40 thinks everything about the [housing] system is broken,” said AFR’s Caroline Nagy in an interview with the Financial Times about the increasingly out-of-reach access to housing. FT’s Rana Foroohar warns that: “Housing affordability and availability may end up being the biggest political issue of our lifetime.”

CLIMATE and FINANCE

Climate Risk.

A recent analysis by Realtor.com reveals that more than one in four U.S. homes, with a combined value of about $12.7 trillion, face severe or extreme climate risks — from flooding and hurricane winds, to wildfires and other hazards. A senior economist at Realtor.com emphasized: “This is not a hypothetical problem. It is a clear and present danger,” pointing out that many homeowners remain unaware of their vulnerabilities.

In the Raleigh–Durham–Chapel HIll Triangle region of North Carolina, for example, flood threats are often underestimated because FEMA’s official maps fail to reflect current realities, leaving nearly 6 million homes at risk without recognition in designated flood zones. These overlooked dangers are already driving up insurance costs and complicating homebuying decisions, even in areas not traditionally deemed high-risk.

POLITICS and MONEY

Crypto Cash.

Wall Street money is clashing with crypto cash on the Hill, as traditional financial institutions are trying to stop the digital asset industry from gaining political and legislative ground in Congress. Even banks are arguing that crypto-friendly provisions would undermine financial stability. Bank associations are trying to keep crypto firms from getting national banking licenses and have even called on lawmakers to tweak an already-signed crypto law, while crypto execs want the White House to keep a ban on banks charging fees for customers to access their financial data.

Blackstone Hearts Collins.

Rolling Stone calls attention to a $2-million donation from the private equity megafirm Blackstone’s Steve Schwarzman to Sen. Susan Collins before she voted to advance Trump’s “Big Beautiful Bill,” the piece of legislation that would deny millions healthcare in exchange for tax breaks for the wealthy. Schwarzman coughed up millions for Collins in 2017 to persuade her to vote against closing an important private equity tax break.