Wednesday, March 31, 2010


Stephens Inc. CEO Warren Stephens writes a guest editorial for Fortune magazine, sharing his thoughts on financial reform legislation under consideration.

Stephens thinks that more government regulation of the industry will do more harm than good. He suggests that some consumers will be protected by the scrutiny, but more will lose access to credit.

So while it might protect a few from abuse, it will inhibit access to credit for tens of thousands. Without that access to credit, economic recovery and job growth will be even more anemic. Consumers would suffer, even though the role of consumer credit in the financial crisis appears minor at best -- especially when we have much bigger issues.

His thoughts really delineate the raging debate in our country right now: there are those who advocate greater government intervention and regulation versus those who want a smaller government role.

Stephens suggests that current law could be modified to force the “too big to fail” financial institutions to improve their financial conditions.

They (government regulators) should also require higher capital ratios at commercial banks and at the holding-company level. Why not create a sliding scale on capital requirements? The bigger your balance sheet, the higher percentage of capital you should have to maintain. That would allow small banks that are no systemic threat to have lower capital ratios while the very large institutions that are "too big to fail" would have a greater equity capital cushion if a crisis did occur.

You can read his full comments at this link.