BRB, just regulating some regulations

Unfortunately, life just isn't fair sometimes, and not getting exactly what you want can really ruin your day. I know I find myself throwing some pretty embarrassing temper tantrums when things don't fall in my favor. Well, that's the way that large banks like JPMorgan Chase JPM are feeling now that the Federal Reserve and Federal Deposit Insurance Corp (FDIC) officials want these same banks to hold an extra level of capital. Bank executives are saying that holding this extra capital will lessen the amount of loans they can provide to fuel the economy.

I'm sure we all know how terrible the economy has been over the last few years, unless you have been living under the Rock of Gibraltar, and I feel fairly safe in assuming that very few people actually enjoy the current situation. I could be wrong though, some people might love unemployment, but to each his own I guess. Anyway, the Basel III agreement requires that banks hold top-quality capital equal to 7 percent of their risk-bearing assets. According to Reuters, “analysts expect large financial institutions to have to hold additional capital of about 3 percent.” That's like, uhhh, 3 plus 7? 10 percent! That is quite a large sum, especially for large banks that hold billions and billions of risk-bearing assets.

On another note, along with the Basel pact, the largest U.S. banks have to face holding more capital than smaller banks with the Dodd-Frank law. “The Dodd-Frank law requires the Fed to come up with additional capital requirements for banks with more than $50 billion in assets and for other large financial firms.” Large banks have to deal with a lot now, and they do not think it's fair. Well, nothing is ever fair and unfortunately nothing ever will be. I have to say that life would be pretty boring if everything was fair. I think it would probably end up making everyone complacent, and ungrateful, leeches.

So, if large banks have to hold more capital and are not going to be giving out as many loans, how is this going to effect commercial real estate? Well, it is probably going to be more difficult to get loans, duh. Banks are going to have to be even more careful than they are now, and that means that those loans that are a little too risky will never be approved, probably. The money will still be there for commercial real estate, but if you are trying to get it from a big bank it might not be as easy as it is now.

Maybe it's a good thing that banks are more regulated. We can avoid, or at least try to avoid, huge bailouts and economic crashes. But, it could also impede our economic progress as we try to get out of our current hole.

What do you think? Should large banks be more regulated, or, should the Federal Reserve leave them alone for now?

Source Article by Dave Clarke from Reuters

#CRE #finance #economy