The Federal Reserve Board voted on June 25 to require large banks to “preserve capital” by suspending share repurchases and to cap—though not suspend—dividend payments in the upcoming third quarter. This occurred, after the Fed allegedly ran a worst-case scenario for the U.S. economy ravaged by the coronavirus pandemic, showing it would cause the nation’s 34 largest banks to collectively lose $700 billion.
Some media played this as the Federal Reserve getting “tougher” to prevent inappropriate activities by the banks. This Fed announcement, however, will not even get one additional dollar of lending into the U.S. real physical economy. It is largely cosmetic.
