This story appeared in Bank Digest.
Federal Insurance Deposit Corporation Vice Chairman Thomas M. Hoenig has written to Senate Banking Committee Chairman Mike Crapo (R-Idaho) and Ranking Member Sherrod Brown (D-Ohio) "to provide an alternative perspective to recent industry statements claiming that large banks have too much capital and that their improving capital position has resulted in too little lending and a constrained economy." According to Hoenig, the Global Capital Index "has consistently shown that the largest, most complex and systemically important banks are less well capitalized than all other smaller banks in the U.S."
Hoenig also asserted that "despite rhetoric to the contrary," capital does not inhibit lending but "is a fundamental and permanent source of funding that supports lending." In addition, while acknowledging the importance of dividends, he said that "funding business growth, assuring future economic success, and promoting capitalism depends upon the retention of earnings."
Hoenig concluded his letter by cautioning against "relaxing current capital requirements and allowing the largest banks to increase their already highly leveraged positions."