Opinion | Michigan’s economy on track, but new bank rule could derail our progress

After years of economic turmoil and setbacks, Michigan's economy is finally on track for a full recovery. Unemployment is holding near a record low, budget surpluses are increasing, and with crucial support from President Biden's American Rescue Plan, our state is diversifying its economy and making substantial investments to emerge stronger than ever from the COVID-19 pandemic. 

As a member of Michigan's House of Representatives, I take seriously the responsibility to  advocate for the interests of my constituents in Calhoun County. My tenure provides me with insight into the challenges facing our community, and with thoughtful policies, I believe our hard-working residents can overcome these hurdles. I know that higher capital requirements make it more expensive for the banks our business sector relies on to provide financial support to  local entrepreneurs. It is this firsthand experience that drives my opposition to the proposed hike in capital requirements for banks — a rule that I fear will set us on a more challenging course.

The Federal Reserve’s proposal seeks to overhaul the capital requirements for large banks, reflecting a global trend where regulators emphasize financial stability and risk mitigation through tougher capital standards. Yet, this well-intentioned proposal might inadvertently hit neither target. The imposition of such a measure could force banks to slash lending, triggering a credit crunch where even the most creditworthy borrowers struggle to secure loans. Instead of securing the financial system, this rule might create a landscape where both stability and growth are elusive. Needless to say, that is the last thing that Michiganders and our businesses need. 

Small, community-based businesses are the driving force behind Michigan’s economic engine. Our state boasts over 900,000 small businesses, employing 1.9 million people, and this proposal could jeopardize tens of thousands of Michigan jobs. These entrepreneurial ecosystems often rely on external financing to fuel growth and sustainability. However, the proposed rule changes would significantly hinder their ability to access the necessary funds to expand, innovate and remain competitive. This would inevitably lead to a decline in entrepreneurial activity, fewer job opportunities and an overall slower pace of economic growth. 

Unfortunately, the problems with this plan don’t stop there. These new capital requirements may discourage investments in crucial infrastructure projects, as higher capital costs could make these  projects less financially viable. My hometown of Battle Creek is in the process of expanding its advanced air mobility park with the potential for many new jobs. If this rule goes into effect,  investments in these manufacturing, training and maintenance facilities could be delayed or not  pursued at all. 

As regulatory discussions proceed in Washington, the consequences of these policies will ripple across towns and cities nationwide, affecting hard-working Americans, the financial well-being of families, and the stability of both local and national economies. We should all urge the Federal  Reserve Board to thoroughly reassess the potential harm these regulations could inflict so that they do not push further economic recovery out of reach.