Jeremy C. Kress (University of Michigan, Stephen M. Ross School of Business) and Graham Steele (University of North Carolina School of Law) have posted Extra-Legal Bank Capital Regulation (University of Chicago Law Review Online, forthcoming) on SSRN. Here is the abstract:
After decades of deregulation culminated in the 2008 financial crisis, policymakers identified bank capital requirements as the most important tool for preventing the next one. Congress responded by establishing new capital floors in the Dodd-Frank Act, prohibiting regulators from weakening capital rules below specified levels. The Trump administration is now violating those statutory limits in a misguided attempt to grow the U.S. economy through financial deregulation. This Essay shows how regulators’ efforts to dismantle the post-2008 capital framework defy the Dodd-Frank Act’s plain text, hand the largest and most systemically important banks an unwarranted advantage over their smaller competitors, and increase the risk of another financial crisis. These ultra vires actions also illustrate the challenges of holding agencies accountable when they violate statutory mandates that lack clear enforcement mechanisms.
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