Republican lawmakers and finance industry lobbyists are using the coronavirus pandemic to press regulators into rapidly waiving financial safeguards for community banks.
And so far, banking regulators have obliged, lifting rules imposed after the 2008 crisis that limit risk-taking and require banks to undergo more strenuous audits.
But experts are warning that the deregulatory blitz, sold as a fix to stimulate business by encouraging more lending, raises the potential for a flood of small bank failures, potentially lengthening economic woes and risking the need for future bank bailouts.
The flurry of advocacy began in March just as the imminent threat of the pandemic seized headlines. That month, several GOP lawmakers contacted regulators at the Federal Reserve and the Federal Deposit Insurance Corporation to urge officials to adjust the threshold at which community banks may qualify for exemption from all risk-based capital requirements.
— source theintercept.com | Lee Fang | May 9 2020