In a recent Senate oversight hearing, the CEOs of eight major banks raised concerns over the proposed regulations known as the Basel 3 endgame, which aim to increase the levels of capital banks need to hold against future risks. The executives warned that these changes could have harmful effects on various entities, including small business owners, mortgage customers, pensions, and other investors. They also expressed worry about the impact on rural and low-income customers.

During the hearing, JPMorgan Chase CEO Jamie Dimon stated that the regulations would have predictable and negative outcomes for the economy, markets, businesses of all sizes, and American households. He further claimed that if unchanged, the regulations would raise capital requirements for large banks by approximately 25%.

The CEOs of America's largest banks, such as JPMorgan, Bank of America, and Goldman Sachs, are seeking to mitigate the potential effects of the new rules. These regulations would affect all U.S. banks with at least $100 billion in assets and are projected to be fully phased in by 2028. The increased cost of capital could potentially impact the profitability and growth prospects of the banking industry.

The CEOs also highlighted the potential benefits for non-bank players like Apollo and Blackstone, who have gained market share in areas where banks have scaled back due to stricter regulations. This includes loans for mergers, buyouts, and highly indebted corporations. While the major banks can comply with the rules as they are currently constructed, there will inevitably be winners and losers.

Dimon emphasized the unintended consequences that these regulations could have on small business owners, mortgage customers, pensions, investors, and rural and low-income customers. He warned that mortgages and small business loans could become more expensive and harder to access, particularly for low- to moderate-income borrowers. Savings for retirement or college could also yield lower returns as costs rise for asset managers, money-market funds, and pension funds.

Additionally, Dimon highlighted that the rise in the cost of capital would make government infrastructure projects more expensive to finance, resulting in higher costs for hospitals, bridges, and roads. Corporate clients would also face increased expenses to hedge commodity prices, leading to higher consumer costs. The regulations could potentially increase borrowing costs for farmers in rural communities, impacting mortgages, credit cards, and other borrowing expenses, according to Citigroup CEO Jane Fraser.

Furthermore, the CEOs cautioned that tighter oversight on banks could drive financial activity towards non-bank players, also known as shadow banks. This could potentially create blind spots for regulators in identifying and managing risks associated with these entities.

During the hearing, the questioning from lawmakers largely followed partisan lines, with Democrats expressing skepticism towards the executives, while Republicans sought information about potential harm to everyday Americans. Senator Sherrod Brown, an Ohio Democrat, criticized the banks' lobbying efforts against the Basel 3 endgame, emphasizing that the economic devastation of the 2008 financial crisis disproportionately affected working families.

As discussions on the proposed Basel 3 regulations continue, the concerns raised by Wall Street CEOs have added another layer of complexity to the ongoing debate. Balancing the need for increased financial stability with potential unintended consequences on various stakeholders will undoubtedly be a central point of contention in the months to come.