Editorial Board
Congress Offers Banks an Ill-Conceived Bargain
More capital and simpler financial rules make sense, but the Financial Choice Act isn't the way.
Not a great deal, Jeb.
Photographer: Michael Nagle/BloombergCongressional Republicans' latest effort to simplify financial regulation is a helpful reminder: Never underestimate politicians' ability to turn a good idea into bad legislation.
This week, the House of Representatives passed the Financial Choice Act, a bill founded on the laudable notion that regulation could be a lot less burdensome if banks were stronger. It offers a bargain: If institutions maintain a leverage ratio of at least 10 percent -- that is, $1 in loss-absorbing equity for each $10 in assets -- they will be exempted from much of the 2010 Dodd-Frank Act.