Another Financial Crisis Could Cost U.S. $5 Trillion to $25 Trillion – as Much as 100 Percent of GDP

Michael Barr of the Federal Reserve addressed the proposal for larger U.S. banks to maintain higher capital levels, highlighting the potential economic loss of up to $25 trillion in another crisis. Despite pushback from big banks, he emphasized the importance of capital for stability. He noted that instead of building capital, many banks have been boosting share prices through stock buybacks. Barr countered arguments that higher capital requirements would limit lending, pointing out past financial crises caused by undercapitalized banks.