(DCNF)—The rapid succession of bank failures last spring clearly spooked federal regulators at the FDIC, the Federal Reserve Board, and bank depositors. The bad decision-making at Silicon Valley Bank, Signature Bank, and First Republic Bank, caused the regulators to implement emergency life preserver measures to banks and conjured up memories of the 2008 financial crisis.
But as the saying goes, in Washington a crisis is always a terrible thing to waste and so we are seeing a reflexive response for more government intervention. No surprise that Senate Democrats immediately pounced into action calling on federal regulators to add another layer of rules including a complex increase in capital requirements on the U.S. banking system. Reacting quickly, the Federal Reserve, with the Office of the Comptroller of the Currency and the FDIC released a joint proposal for the U.S. implementation of the so-called “Basel III regulatory framework.” These are complex rules, but in a nutshell, these rules would increase the amount of money that banks hold in reserve by 25%.
Sorry, this WON’T stop occasional bank failures of the hundreds of banks in America. What it will do is choke off lending to small businesses, homebuyers, and consumers that need loans.
The theory behind higher capital requirements is that banks will have more money in reserve to offset the losses from loans that go sour. Bank reserve requirements are a good safety precaution for sure. We don’t want banks to take on too much risk and then rush to a taxpayer safety net every time they are in trouble. But many well-respected government and private studies have found that American banks as a group are NOT undercapitalized, nor were the banks that failed.
Those banks simply made a series of bad investment/lending decisions. Ironically, some of the bad decisions, such as holding on to “safe” low-interest-paying Treasury bonds, which then lost market value when the Fed finally began raising interest rates, were a direct result of federal regulations.
The FDIC and the Federal Reserve are authorized to maintain the health and safety of America’s banks. Their job is to avoid 1930s-style bank runs that could do great damage to our financial system. Here’s the problem: these new rules would punish banks that are financially sound and shrink the available pool of loans available to homebuyers, small businesses, and lower income families. Less lending to qualified borrowers would mean less economic growth and less financial stability.
A forthcoming Committee to Unleash Prosperity study finds several negative – unintended – consequences of these rules based on the best research findings:
First, they will reduce the available pool of capital by an estimated $100 to $150 billion a year.
Second, the reduction in lending will reduce economic activity and thus shrink annual GDP by as much as 0.6%.
Third, because foreign banks are not subject to these regulations, American banks will lose competitiveness to foreign banks.
Fourth, and most importantly, it’s the little guy that gets squeezed out of the lending market. Small businesses and lower-income families are most likely to be the ones whose loans are rejected as a result of these new rules.
It’s simple: Lending is the oxygen supply that keeps our economy vibrant and competitive. Cutting it off, as the Basel rules are proposing, won’t make our economy safer, but will put it at greater risk.
Stephen Moore is a senior fellow at the Heritage Foundation and an economist with FreedomWorks. His latest book is Govzilla: How the Relentless Growth of Government Is Devouring Our Economy.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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Why One Survival Food Company Shines Above the Rest
Let’s be real. “Prepper Food” or “Survival Food” is generally awful. The vast majority of companies that push their cans, bags, or buckets desperately hope that their customers never try them and stick them in the closet or pantry instead. Why? Because if the first time they try them is after the crap hits the fan, they’ll be too shaken to call and complain about the quality.
It’s true. Most long-term storage food is made with the cheapest possible ingredients with limited taste and even less nutritional value. This is why they tout calories so much. Sure, they provide calories but does anyone really want to go into the apocalypse with food their family can’t stand?
This is what prompted the Llewellyns to launch Heaven’s Harvest. They bought survival food from multiple companies and determined they couldn’t imagine being stuck in an extended emergency with such low-quality food. They quickly discovered that freeze drying food for long-term storage doesn’t have to mean sacrificing flavor, consistency, or nutrition.
Their ingredients are all-American. In fact, they’re locally sourced and all-natural! This allows their products to be the highest quality on the market, so good that their customers often break open a bag in a pinch to eat because they want to, not just because they have to due to an emergency.
At Heaven’s Harvest, their only focus is amazing food. They don’t sell bugout bags, solar chargers, or multitools. They have one mission – feeding Americans in times of crisis.
What they DO offer is the ability for people to thrive in times of greatest need. On top of long-term storage food, they offer seeds to help Americans for the truly long-term. They want them to grow their own food if possible which is why they offer only Heirloom, Non-GMO, Non-Hybrid, Open-Pollinated seeds so their customers can build permanent food security on their own property.
