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Federal regulators are backing a plan that essentially will force the nation's biggest banks to finance their operations with more equity and -- -- -- the proposal is designed to make banks more financially sound but critics claim -- could ultimately.
-- of the US economy joining us now as the CEO of financial services roundtable and former Minnesota governor Tim Pawlenty is thank you so much for joining us governor.
Are who you are critic of these new capital rules -- Well we're expressing concern on behalf of the American finance industry for this reason.
The levels that were announced are about twice as high as much of the rest of the world so it puts American financial institutions at a competitive disadvantage.
And keep in mind we favor more equity.
However there's a tipping point if you go too far at the trade off is.
It stifles lending and has less money available for lending and economic growth that we think these recent proposals have gone too far -- -- -- Well that's my question does doubling the capital requirements.
At more protection or not I mean is it just to make us feel better but ultimately does -- provide more protection for the taxpayer ultimately.
Well you question trying to strike the balance between more protection but also doing things that allow reasonable landing in an economic growth and if it is a bell curve effect you want to try to find that perfect place on top of the bell curve I think.
Most of the people who are knowledgeable about this situation would say.
He's probably go too far and will stifle economic growth and that's our concern and by the way it's double nearly double -- the standard that's been set under Basel III and in much of the rest of the the developed a market world but this seems to be about a political backing for these tough for rules so how do you combat -- What I have to do it through education and an advocacy it is very complicated how they calculate this is all very complicating course people are skeptical of some of the larger institutions in the wake of the crisis they have to overcome all of that.
But part of it is just explained that the main trade -- here is.
Certainly more capital is desirable we have favored and supported that but don't go so far that you suffocate landing and I think they've cross that line.
Do you think the banks though in the way because we look now back off to the the the recession and what happened with the mortgages that went bad that the banks have actually gotten bigger and -- More into connected so who which is strange when you think of what happened.
We didn't want that's an area but it seems like we're back to a point where the big banks are bigger and perhaps -- even more exposed.
Well I think it but at the same time we we don't want to tie the American banking institution -- finance industry's hands behind their back because of the twenty to thirty or so largest banks in the world only a handful of them are American banks and if you do things to stifle them.
-- -- -- you know allow them to not be able to compete globally like they should and that hurts America.
And then beyond that in terms of the size.
We want to make sure it's not so much -- the government's telling businesses what size they can be but that proper safeguards are in place in case one of these institutions tumble.
And that's what Dodd-Frank was all about that's what all the new regulations are all about -- tremendous progress has been made more capital more oversight.
An orderly liquidation authority to wind down procedures that.
Really -- they take the lessons and the problems of the crisis and decrease the probability that ever happening again we help.
Well we're almost out of time you mentioned that you can -- that lending will dry out when none of these banks having to hold more capital on their books what else do you perceive as a problem.
Because of these new rules.
-- -- -- to put it quantitative a number on it it's about ninety billion dollars and so as you think about the impact that now banks will hold have to hold that amount to raise that amount as opposed to deploying it in the form of lending into the economy.
That's a significant number and again.
You can get complete security around banks if you just have a -- hold everything in cash but that's not a bank that's a pile of cash so assuming they're gonna deploy some of that you have to be willing to assume reasonable risk we don't want reckless -- but -- -- -- reasonable risk.
Reasonable risk that's the key expression thank you so much governor Tim Pawlenty for joining us we appreciate it.
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