Lucas Questions Fed Chairman Powell and CFTC Chairman Behnam on Basel Endgame
At today’s two hearings in the House Financial Services Committee and House Agriculture Committee, Congressman Lucas questioned both and Federal Reserve Chairman Powell and CFTC Chairman Behnam on the Basel Endgame proposal. Lucas questioned Chairman Powell on how the Fed’s bank capital proposal will have a negative effect on commodity derivative end-users and disincentivize banks from offering clearing services. Lucas then went to the House Agriculture hearing, where he followed-up on these issues with Chairman Behnam.
HIGHLIGHTED QUOTES: Lucas: “When you were before this Committee a year ago, I cautioned against raising capital requirements on commodity derivatives… Unfortunately, we now know that the proposal does impact commodity derivatives… Chairman Powell… ease my concerns here, will you and the Fed work to fix this?” Powell: “Let me start by saying I want to echo the fact that our commodity markets and capital markets are a huge national asset… I now understand what you’re referring to is things that were done to increase capital requirements for various kinds of derivative activities. I’ll just say that’s an area where we are aware of the concerns and is an area we are taking a very close look at.” Lucas: “Chairman Powell, I’d now like to focus-in on how the proposal is set to significantly disincentivize banks from offering clearing services… I am worried that this will make it even harder for end-users to find a bank to clear their hedges… Will you work with the CFTC to address this problem?” Powell: “We are aware of those concerns and are prepared to work with other agencies and also to make sure that our capital proposal appropriately addresses them.”
