Big bank executives will be testifying before The U.S. House Committee on Financial Services today and Thursday in Washington.
Among them are Jamie Dimon, head of JP Morgan Chase, along with chiefs of Bank of America, Wells Fargo and Citigroup.
Their aim? To make a case against tighter regulation of commercial banking, particularly higher capital reserve requirements.
Capital reserves are the amount of cash banks must keep on hand to cover loans that go bad. Higher reserves are meant to keep the "too big to fail" banks from overextending themselves and pose a risk to the U.S. economy, as happened with the 2008 mortgage crisis.
In written statement to the committee, Dimon said high capital reserve requirements curtail lending at a time when, he contends, looser credit is needed.
"This is bad for America, as it handicaps regulated banks at precisely the wrong time, causing them to be capital constrained and reduce growth in areas like lending, as the country enters difficult economic conditions," he wrote.
He also noted that constrained bank credit means homebuyers and other borrowers are often forced to go through non-bank lenders at higher interest rates.
However, proponents of higher reserves and tighter regulation says big banks have shown they can't be trusted to put safe credit practices above the potential of short-term profits. Capital requirements were strengthened so our financial system would not see a repeat of 2008, with it's devastating impact on ordinary Americans, and the need for another massive taxpayer buyout of the banks.
We tend to agree. Major Banks pushed for the repeal of Glass-Steagall, the law separating commercial and investment baks passed in in the wake of the Wall Street Crash of 1929 and the resulting Great Depression. The financial giants got their way -- and went on a reckless spree that resulted in the turmoil of 2008.
Banks may miss out on some extra profits. And some consumers may see higher interest rates. But the alternative is to risk allowing big banks to again bring our economy to near collapse.