The Chairman of the House Financial Services Committee, Patrick McHenry (NC-10), was joined by all Committee Republicans in a letter to Federal Reserve Chairman Jerome Powell. The lawmakers are demanding that the Fed withdraw and re-propose the misguided Basel III Endgame rulemaking in its entirety, given the substantial changes to its original form. The letter follows Chairman Powell’s testimony before the Committee in support of re-proposal.

Read the full letter here.

Read key excerpts from the letter below:

“We write to underscore the importance of withdrawing the current Basel III Endgame proposal and submitting any new change through a new notice of proposed rulemaking.  As we have stated for the past year, the July 27, 2023 proposal lacks the necessary evidence and analysis to completely overturn the current methods used for calculating risk-based capital requirements. If finalized in its current form, the proposal would represent the most significant changes to the bank regulatory framework since the Dodd-Frank Act.

“To be sure, the vast majority of comment letters on the current proposal, sent by stakeholders from across the ideological spectrum and sectors of the economy, support a withdrawal, re-proposal, or otherwise express significant concerns with the proposal.  We are concerned by ongoing reports that the Federal Reserve will seek an as-yet undefined ‘partial preproposal,’ and that ‘[t]here will be additional changes that will be made that won’t be re-proposed.’ Let us be clear, the current proposal contains such widespread structural and fatal flaws that a complete withdrawal and re-proposal in its entirety is the only solution.

…

“Courts have repeatedly made clear that an agency’s final rules must be a ‘logical outgrowth’ of the rules as proposed. Fixing each of the current proposal’s flaws will require ‘broad and material changes’ that go well beyond a ‘logical outgrowth’ of the proposal, thereby requiring re-proposal. To be sure, there may be minor recalibrations that are logical outgrowths of the proposal. However, given the interconnectedness of risk-based capital requirements, even recalibrations must be part of any re-proposal.

“We appreciate the Federal Reserve Board’s efforts to meaningfully engage with the public in its rulemaking process. We strongly encourage the Board to avoid potential litigation and reputational risks by withdrawing and re-proposing in the entirety.”

Source: House Financial Services Committee