Better Markets sues Fed over capital rule overhaul, alleging improper bank contacts
Better Markets has sued the Federal Reserve and Vice Chair Michelle Bowman, alleging improper private contacts with banks during a capital rule consultation.
A Washington-based nonprofit that campaigns for Wall Street reform has filed suit against the U.S. Federal Reserve and its Vice Chair for Supervision, Michelle Bowman, accusing the central bank of mishandling a broad rewrite of its capital regulations.
The complaint, lodged in Washington, D.C., centres on private discussions Bowman held with major banks while a public consultation on the capital rules was under way. Better Markets argues that those contacts breached the Administrative Procedure Act, the statute that governs how federal agencies make rules.
The suit points to reporting that Bowman did not anticipate another aggressive lobbying campaign from the industry, which had already pushed hard for changes to the Fed's original 2023 capital plan. It also cites a report that Bowman privately urged Wall Street leaders to back capital proposals widely viewed as favourable to the industry and to stop seeking further exemptions.
Under the APA, agency officials are barred from discussing matters tied to a live rulemaking with interested private parties. The lawsuit contends that the interactions amounted to a bad-faith and corrupted process, and that the circumstances justify a court order halting what it describes as an unconstitutional proceeding.
The Fed did not immediately respond to a request for comment. Bowman, who has been steering the revisions, has said her aim is to make regulation and oversight more streamlined and more attuned to genuine risks.
Lawsuits against the Fed over its rulemaking are rare, though Wall Street trade groups have often taken federal regulators to court. In 2024, large banks under the previous Democratic administration sued the central bank over its annual stress tests and fair lending rules — the first such challenges in recent memory, according to an analysis at the time and academic observers of the Fed.
The case reflects mounting resistance to the Trump administration's push to roll back a series of financial safeguards that regulatory advocates regard as essential to the stability of the financial system.