On July 9 and 10, the Fed Chair Jerome Powell testified at the respective financial committees under the U.S.
Senate and U.S.
House of Representatives. Lawmakers asked questions on various Fed initiatives, such as the long-term debt proposal, debit interchange fee cap proposal, reforms to the discount window, potential changes to liquidity requirements, and the incentive-based compensation arrangements proposal.
On long-term debt proposal, Powell stated that he was unsure if it would be “inappropriate” to move forward with finalizing a long-term debt proposal rule before finalizing Basel III. The Fed is currently considering comments on the proposal to correct the issues experienced by banks in Spring 2023. On the debit interchange fee cap proposal, Rep. Ann Wagner (R-MO) pointed out how the Fed seemed to propose a rule, Regulation II, despite the Fed releasing research that found negative consequences of the debit interchange fee cap. Chair Powell stated he would have to review the research. On liquidity requirements and Basel III, Chair Powell alluded that the Fed was “pretty close” to releasing that proposal publicly, noting that the Fed’s liquidity proposals may be released “sometime later this year.”
On the incentive-based compensation arrangements proposal, Sen. Elizabeth Warren (D-MA) questioned Powell on how none of the ten largest banks put in policies to delay annual bonuses to those who engaged in risky behaviors. Warren alleged that the Fed did not join the other financial regulators in implementing Section 956 of Dodd-Frank. Thus, there are “no rules” to stop banks from rewarding executives’ risky behaviors, despite Warren quoting Powell that the Fed would be proposing such a rule. Additionally, the testimonies also included discussions about high housing prices, the Fed’s balance sheet, U.S. fiscal policy, stablecoins, digital assets, and synthetic risk transfers.
