Say What? Mnuchin Says The Treasury Has Nothing To Do With Basel III

The Office of the Comptroller Of The Currency was part of the Treasury Department last we checked. But it’s even worse when you dive into his statement…

Of course, the whole time our Treasury Secretary is talking, he is saying nothing in a poor attempt at Fedspeak, but he did let this little nugget slip.

So as he is describing it, he says “The Fed is really the primary person involved in Basel III, NOT The Treasury”.

Most likely the embed will have problems. Especially around the seconds he says it. Somewhere around 8 minutes and 30 seconds Mnuchin is discussing Dodd-Frank and Basel III:

For some reason, people must be doing double-takes because it will most likely freeze up and be finicky:

Basel III is a bunch of regulatory and compliance mumbo-jumbo wrapped up with a bow, in the name of “global stability”. The crux of the matter is liquidity, capital requirements, “globally systemic institutions” (as in too-big-to-fails), and all that good stuff that is supposed to keep our debt based fiat currency safe and sound in the bank.

Well, here’s some boring legalese for everybody, not so much to put anyone to sleep, but to show that oh yeah, the treasury does have a very important role in Basel III. According to OCC documents, the Treasury Department is actually the one that creates the rules, regulations and amendments for compliance.

Take this Bulletin from the OCC:

Subject: Basel III Conforming Amendments
Date: March 7, 2014 To: Chief Executive Officers of All National Banks and Federal Savings Associations, Federal Branches and Agencies, Department and Division Heads, All Examining Personnel, and Other Interested Parties
Description: Interim Final Rule

Summary
The Office of the Comptroller of the Currency (OCC) has issued an interim final rule with request for comments (final rule) that makes technical and conforming amendments to its regulations governing national banks and federal savings associations. The final rule, which is effective March 31, 2014, amends various regulations in order to make those regulations consistent with the recently adopted Basel III Capital Framework. The Basel III final rule revised the OCC’s regulatory capital rules, adding a new common equity tier 1 requirement, revising the definitions of tier 1 and tier 2 capital, and integrating federal savings associations into 12 CFR part 3 and 12 CFR part 6 (Prompt Corrective Action). The final rule makes technical, clarifying, and conforming amendments to the OCC’s rules, by providing cross-references to new capital rules, where necessary, and deleting obsolete references. The final rule also makes changes to subordinated debt rules to clarify the requirements subordinated debt must meet and the procedures required to issue and redeem subordinated debt.

The Basel III Capital Framework provides different mandatory compliance dates for advanced approaches national banks and federal savings associations and non-advanced approaches national banks and federal savings associations.1 Advanced approaches institutions must comply with the Basel III Capital Framework beginning on January 1, 2014,

Subordinated Debt – 12 CFR 5.47 and 12 CFR 163.81
The final rule clarifies and revises the OCC’s rules governing subordinated debt issued by national banks to make those rules consistent with the Basel III Capital Framework. Unlike the current regulatory capital rules, the Basel III Capital Framework does not identify specific types of instruments that are included in regulatory capital. Instead, the Basel III Capital Framework lists criteria that an instrument must satisfy to be included in regulatory capital.

Note for Community Banks
The amendments made by this rulemaking apply to all banks, including community banks. Community banks must comply with the Basel III Capital Framework (and statutory limitations that cross-reference the regulatory capital rules) beginning January 1, 2015, while advanced approaches national banks and federal savings associations must comply with the Basel III Capital Framework beginning January 1, 2014.

Background
On October 21, 2013, the OCC published in the Federal Register the Basel III final rule (78 Fed. Reg. 62018, Oct. 11, 2013), which completely revised the OCC’s regulatory capital rules for national banks and federal savings associations. The final rule, in part, reflected agreements reached by the Basel Committee on Banking Supervision (BCBS) in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems.”2 The Basel III agreements are intended to improve both the quality and quantity of banking organizations’ capital, as well as to strengthen various aspects of the international capital standards for calculating regulatory capital. The OCC issued the Basel III final rule in conjunction with the Federal Deposit Insurance Corporation and the Board of the Governors of the Federal Reserve System.

So what we have here is a neutered Treasury Department that is told how to run the country by private banks, and not only that, but global banks who may or may not have the United States in mind, and if that is the case, It’s cool what Mnuchin said because they just will change the federal register when they are told.

This opens up a new can of worms, however, because we are told all the time the Fed is not “political”. Well, if the banks are telling the Treasury Department what to put on the books, kinda hard to see how that’s not very political.

On the other hand, if the Treasury and the Fed (as well as other agencies like the FDIC) are working together, well then, seems like we have a Treasury Secretary who either doesn’t know what the role of the Treasury is at best, or he could be unfit for duty at worse.

But it’s not like they respect “weights and measures” or “make any thing but gold and silver coin a tender” anyway.

At least he was able to audit our gold at Ft Knox:

For more about Basel III, here it is straight from the BIS