The Finance 202 The Fed is putting big banks in timeout Some regulators say its not enough

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Summary

And a test the Fed added to evaluate how the banks would hold up under different kinds of recoveries revealed weaknesses. If the recovery is sharp and swift, the banks will preserve enough of their capital cushions to remain sound, the Fed found. with Brent D. Griffiths The Federal Reserve is declaring a temporary timeout on moves by the biggest banks to reward their shareholders. They included Fed governor Lael Brainard, an appointee of President Obama, who objected to the decision to allow the banks to continue paying dividends at all. The FDIC also scrapped a requirement that banks have to hold collateral for derivatives trades between affiliates of the same firm.

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with Brent D. Griffiths

The Federal Reserve is declaring a temporary timeout on moves by the biggest banks to reward their shareholders.

Pointing to the ongoing economic turmoil unleashed by the coronavirus pandemic, the Fed concluded its annual stress test of the industry by capping bank dividends and barring them from resuming stock buybacks through at least September.

It found the nation’s 34 biggest banks performed well under the pre-pandemic scenario for an economic shock the central bank used to perform part of the test.

A JPMorgan Chase bank branch in New York. (Jeenah Moon/Bloomberg)

But the scale of the ongoing crisis has already dwarfed conditions laid out in that February hypothetical. And a test the Fed added to evaluate how the banks would hold up under different kinds of recoveries revealed weaknesses.

If the recovery is sharp and swift, the banks will preserve enough of their capital cushions...

Read the full article @ The Washington Post