Better Markets Sues Federal Reserve Over Capital Rule Overhaul

A Washington nonprofit group called Better Markets is suing the US Federal Reserve and its top regulatory official over allegations that the Fed mishandled a sweeping overhaul of its capital regulations.

The lawsuit, filed in Washington D.C., claims that private interactions between the Fed's vice chair for supervision, Michelle Bowman, and Wall Street banks corrupted the federal rulemaking process. According to the complaint, these interactions deprived Better Markets of due process under the Fifth Amendment.

The lawsuit cites April reporting by Reuters that Bowman told banking executives she did not expect the industry to stage another major pushback in an attempt to win further capital relief. It also cites a report by Bloomberg that she privately 'told Wall Street leaders to support capital plans that are widely seen as a win for industry and stop asking for carve outs.'

The proposed changes to the Basel, GSIB surcharge, and other related rules would result in capital falling for affected lenders by 4.8% in aggregate.