In an effort to address a perceived problem, the pendulum always seems to swing too far in one direction. This is especially true for regulatory agencies such as bank regulators. They tend to overreact. In addressing the recent bank failures and stress in the financial system, regulators are proposing an overreaction that will impose additional burdens on bankers. Recently, the three primary federal regulators — the Federal Reserve, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency —issued a 1,087- page rule that will raise capital requirement for large banks by about 16 percent. Large banks...

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