Congress Flirts With Disaster on Bank Leverage Ratios

By Sheila Bair (original source The Wall Street Journal)

“The stock market’s recent volatility is a reminder that financial conditions can change quickly. Whether periods of stress turn into severe economic downturns depends in large part on whether the nation’s major banks are sufficiently capitalized to weather the market’s ups and downs.

Regulators have worked hard to increase bank capital levels since the 2008 financial crisis, when major U.S. banks collapsed under the weight of their own debt obligations. It is alarming that several senators are now considering legislation that would weaken a key constraint against excessive leverage.”