Federal Reserve Governor Steve Miran is calling for a full reset of Wall Street banking rules. On Wednesday, while speaking to the Bank Policy Institute, Steve said the Fed needs to fix the entire post-crisis framework before wasting time debating the balance sheet or how much interest it pays on reserves. “For many years, financial regulation mostly moved in one direction, increasingly restricting the banking sector,” Steve said. He pointed out that the impact of these rules on markets, credit, and monetary policy gets ignored way too often. He believes this overregulation has pushed traditional banking activity out of the regulated space entirely. “While I have no bias against nonbank financial companies,” he added, “credit allocation should be driven by market forces, not regulatory arbitrage.” Steve says regulation moved too far after 2008 Steve also said the banking rulebook went into overdrive after the 2008 financial crisis. And now, more than a decade later, the pendulum has swung too far. “Regulators should resist the urge to overreact,” he warned. His view is that stricter capital rules, especially ones like the enhanced supplementary leverage ratio, forced core lending activity into the shadows, out of reach from formal oversight. That rule, part of a broader set of global Basel III capital standards, is meant to serve as a backstop to the usual risk-based capital rules. But it’s now under fire. Steve isn’t the only one sounding the alarm either. Other Trump-backed officials and some top banking voices have also pushed to loosen it. Their argument: the rule punishes banks for holding low-risk assets like Treasuries. This week, Bloomberg said the Fed and other top regulators submitted a final plan to the White House to revise the leverage ratio. The update would let the biggest U.S. banks, including JPMorgan, Bank of America, and Goldman Sachs, hold less capital compared to total assets. It’s mostly in line with a proposal from back in June, but not everyone got what they wanted. Some banks tried and failed to get Treasuries excluded completely from the ratio calculation. New rule advances as Treasuries outperform swaps News of the planned changes moved markets fast. After Bloomberg reported it on Tuesday, Treasury bonds outperformed interest-rate swaps, a rival fixed-income instrument. The spread between five- and 10-year Treasury yields and swap rates tightened to levels not seen since March. Traders saw it as a green light for banks to load up on more Treasuries. Officials are still aiming to get the rule change finalized “in the coming weeks,” depending on White House sign-off. But that could shift. Nothing is locked in yet. And it’s clear that not every ask from Wall Street made it into the draft. That said, Steve thinks the focus needs to stay on rewriting the full regulatory setup before the Fed dives back into balance sheet debates or reserve management. He also pushed for more transparency from the Fed itself. In his words, both the public and the banking industry would gain from knowing what the Fed is doing, and why. Right now, Steve argued, too much of the regulatory impact is invisible until something breaks. That’s not good enough anymore. Sharpen your strategy with mentorship + daily ideas - 30 days free access to our trading program
