The Federal Reserve is cracking down on giant banks' reckless borrowing

The Federal Reserve is cracking down on giant banks' reckless borrowing

by Matthew Yglesias at Vox

http://www.vox.com/2014/12/10/7369049/fed-leverage-ratio

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1 A new proposed Federal Reserve regulation will put tougher limits on how much debt (and therefore risk) the eight largest banks in America can carry.

2 This new rule is, by design, similar to — but tougher than — the international regulation negotiated in Basel, Switzerland.

3 Even though the formal rule is tougher, seven of the eight banks are already in compliance with it — JP Morgan will need about $22 billion in additional capital.

4 Banks have until 2019 to comply, so JP Morgan can easily raise the needed $22 billion out of retained profits between then and now. This just means reduced payouts to shareholders.



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