Wall Street Giants Battle Over Capital Rules: JPMorgan and Bank of America Unite Against Goldman Sachs and Morgan Stanley
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JPMorgan and Bank of America stand to lose $13 billion and $9 billion in capital relief under the Fed's revised surcharge formula, while Goldman Sachs and Morgan Stanley each gain $1–2 billion — splitting Wall Street's years-long deregulation alliance wide open.
What exactly are they fighting over?
In March the Fed proposed changing how it calculates the capital surcharge for global systemically important banks — the G-SIB surcharge, an extra capital buffer imposed on the largest banks.
The key change: short-term wholesale funding — repo agreements, commercial paper, and other short-duration borrowing between financial institutions — would be treated more harshly, because the Fed views it as the first funding source to vanish under stress.
This means → banks that rely heavily on wholesale funding benefit from the new formula; banks funded mainly by deposits see their relief shrink.
Who wins, who loses, and by how much?
In a June letter to the Fed, JPMorgan estimated it would lose $13 billion in capital relief due to the wholesale-funding adjustment. Bank of America put its loss at $9 billion.
Goldman Sachs and Morgan Stanley would each gain an extra $1–2 billion in relief — a finding independently confirmed by advocacy group Better Markets.
In plain terms = the same rule change hands deposit-heavy banks a bill north of $20 billion while handing investment banks a multi-billion-dollar bonus. The redistribution is almost symmetrical.
What arguments is each side making?
JPMorgan + Bank of America argue the new formula incentivizes trading over real-economy lending — contradicting the Trump administration's own push to loosen capital rules to boost lending. JPMorgan's commercial-banking head Stevie Baron wrote publicly: "Under the current proposal, the Fed would incentivize trading activity, not lending to small businesses and clients."
Goldman + Morgan Stanley counter that the revision improves risk sensitivity and urge the Fed to finalize it promptly — both banks made this case in their comment letters.
This reflects a classic regulatory dynamic: both sides frame their position as "better risk management," but the real dividing line is which version of the formula benefits whom.
Which side will the Fed back?
Four people familiar with the matter told Reuters the outcome remains uncertain. Fed Vice Chair for Supervision Michelle Bowman has asked the banks to limit their feedback; three of those people believe she leans toward keeping the draft largely intact.
The clock matters most: Democrats are expected to retake the House next year, sharply increasing scrutiny of Trump-era regulators — the rule must be finalized before year-end or the window closes.
Better Markets' bank-policy director Christopher Appel called the surcharge a critical remaining safeguard as regulators cut overall capital requirements: "The Fed has to get this right."
What does this mean for the market?
If the Fed keeps the current draft, Goldman and Morgan Stanley gain more room to expand trading operations; JPMorgan and Bank of America face tighter capital constraints than they expected.
This means → the same Basel "endgame" overhaul could widen the capital-cost gap between Wall Street's two business models — deposit banks vs. investment banks — with the rules themselves doing the pulling.
All four banks and the Fed declined or avoided direct comment; Bank of America said only that it supports reforms that "drive Main Street lending." Whether this internal rift resolves before year-end will determine if years of capital-rule reform can land on schedule.
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