Washington prepares $175B break for big banks — weakening protections against financial crisis

Washington is getting ready to potentially make life easier for the biggest US banks. That can sound pretty abstract if you don't strip it down to the mechanics. Regulators decide how much capital banks must keep to absorb losses and how much liquidity they need if funding starts to disappear. More capital and more liquidity make banks sturdier, though they also limit how much money banks can lend, trade, or return to shareholders. Less of both gives banks more room to move while leaving a thinner cushion when conditions turn. That tradeoff is now back at the center of US bank policy. On March 12, Federal Reserve Vice Chair for Supervision Michelle Bowman said regulators are preparing a softer rewrite of the long-disputed Basel III endgame rules, the post-2008 capital package Wall Street has spent years trying to weaken. The new version could leave large-bank capital requirements roughly flat or slightly lower than current levels once related changes are included, and could free up more than $175 billion in excess capital across the industry. Surcharges for the largest global banks may also fall by about 10%. That is a sharp turn from where the debate stood less than three years ago. The earlier draft, pushed under Bowman's predecessor, Michael Barr, in 2023, would have raised capital requirements at the biggest banks by about 19%. Banks argued that the proposal would make credit more expensive, reduce market-making capacity, and push activity out of the regulated system. Their critics argued the opposite: years of easy money, concentrated asset exposures, and repeated stress episodes had made thicker buffers necessary. The new draft lands much closer to the banks' side of that argument. Washington’s proposed banking policy pivot to ease capital and liquidity rules, potentially unlocking $175B in excess bank capital. The contrast is especially striking for Bitcoin: while Washington appears ready to give large banks more flexibility on capital and liquidity, direc...