Treasury Secretary Scott Payette says that the American organizers are about to reduce the main regulatory requirements of banks that hope the Trump administration is to pump more liquidity into the treasury market, enhance lending, and reduce upward pressure on long -term borrowing rates.
This step will witness a retreat from the main change that occurred after the 2008 financial crisis when the organizers imposed a series of new requirements designed to protect the banking system from future threats to its stability.
One of those requirements that BESSENT wants to adjust is the alleged additional leverage percentage (SLR), a base that requires large banks to maintain the previously temporary store for a total loan and debt portfolio. This lint includes large possessions of the cabinet.
Bankers assert that their demand is a capital when they traded against their treasury investments, which discourages them as mediators in the financial markets, which may contribute to stress when the markets become volatile.
US Treasury Secretary Scott Bessin. (Reuters/Nathan Howard/File Photo) ·Reuters / Reuters
The issue of liquidity in the market acquired about $ 30 trillion of the United States Treasury to a new urgency after problems in 2020 during the Covid-19 pandemic and a modern climbing in the long-term cabinet revenues driven by increasing anxiety over the American debt track.
Some market monitors say that the confidence of the investor in US debt has been shaken by the financial challenges of the nation.
Jpmorgan Chase (JpmCEO Jimmy Damon said on Friday that a crack in the bond market “will happen.”
“I don’t know whether it is a crisis within six months or six years, and I hope we will change the course of debt and the ability of market makers to make markets,” Damon said at the National Economic Forum.
Unfortunately, we may need to awaken us. “
Banks are the main buyers of the United States Treasury and work as two controls in the treasury market, which helps other investors to buy and circulate government bonds.
Bessent hopes to allow re -setting the capital base to banks to add more cabinet to their public budget, thus giving supply flood a new gradual buyer. It is also hoped that it will facilitate the facilitation of banks on the emerging pressure on the long-term cabinet revenues-another major goal for the new management.
“SLR can risk becoming a binding restriction, instead of the background,” Pesin said in a speech on March 6 before the New York Economic Club. “The result is that the safest assets in the country, the US Treasury Secretary, are not dealt with this way when applying the lunch restricting.”
Bankers explain that they hope for this change.
Goldman Sachs group (GSCEO David Solomon last month as an “important structural reform” “will have the benefit of the treasury market.”
Dimon of Jpmorgan also agrees that the SLR modification will help the market in times of stress, although he indicated that he also wants to see reforms through many capital requirements.
“The reason for changing some of these things is banks – adult market makers can mediate more in the market,” Damon told analysts last month.
Jimmy Damon, CEO of JPMorgan Chase, visits “morning with Maria” with Maria Bartopiromo on the Fox Business Network in April. (Noam Galai/Getty Images) ·Nam Galay Vitty Pictures
“If they do so, the spread will come, then there will be more active traders,” Damon said. “If they do not do that, the Federal Reserve will have to mediate, which I think is just a bad political idea that every time there is kerfuffle on the market, the Federal and Mediterranean Reserve should come.”
Banks and pressure groups want more than SLR changes, on the pretext that the capital requirements set make the least profitable for banks to provide commercial loans.
James Angel, Professor of Georgetown University, McDono, Professor James Angel, said that the cost of the capital, “the cost of the capital, said,”
BESSENT may have an ally of SLR reform in the Federal Reserve Chairman Jerome Powell, who said that al -Qaeda’s mitigation of American banks could improve the performance of the treasury market.
Powell said in February during the testimony in front of legislators in the House of Representatives.
“The amount of the cabinet has grown much faster than the mediation capacity that has grown,” he added. “The clear thing to do is reduce the effective supplementary lifting rate, and link it.”
The Federal Reserve Governor Michelle Bowman, who has been nominated to be the best banking regulator at the Federal Reserve, is another supporter of the SLR modification. It has been nominated by the Senate Banking Committee but requires confirmation of the full Senate.
She indicated in a speech last January that SLR “can disrupt the ability of banks to engage in the mediation of the Treasury,” which said that if it occurred in the first days of market pressure during the Covid-19s.
The ruler of the Federal Reserve, Michelle Bowman, President Trump’s candidate to be Vice -President of the Federal Reserve for Supervision. (Reuters/Kevin Maada/File Photo) ·Reuters / Reuters
In April 2020, the Federal Reserve was forced to intervene temporarily and reduce the amount of capital banks needed to keep them against the treasury, and to liberalize their public budgets to support the treasury and economy market during the crisis.
“In the category” reforming what is broken, “Bowman added. This is an issue of wisdom to address before the emergence of future pressure that may disrupt the performance of the market.
Some critics indicate that there are risks to facilitating banks to open more cabinet, which carry risks if the rates rise suddenly.
This is what happened to Silicon Valley in March 2023, as high pressure rates on a large group of bonds. The lender eventually failed, which led to a small panic between the deposit of the banking system.
Angel has doubts that this can become a big problem.
“I have a lot of respect for the ruler Bowman, and I think it may be right in this,” he said. “I don’t think SLR will be the seeds of the next crisis.”
