Easing leverage limits on banks could backfire

Financial Times - 06:00
The move would repeat old errors and encourage the buying of Treasury debt over private sector lending

The writer is the former chair of the FDIC and author of ‘Money Tales’, financial education books for children

US Treasury Secretary Scott Bessent has said he wants to deregulate the financial system responsibly. He has pointed to relief for community banks and other valid areas for reform.

Unfortunately, he has also floated a big bank priority: loosening limits on “leverage” — the ratio of bank’s debt to equity — and eliminating those restraints entirely for investments in short-term Treasuries. This would repeat regulatory errors that led to past financ...
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