Summary
If Federal Reserve Banks cannot deny master account applications, state chartering laws would be the only protection for the U.S. financial system. This could lead to a “race to the bottom” among states to attract business with less regulation.
Key Points
1. The judge expressed concerns about the potential for a ‘race to the bottom’ among states and politicians in attracting business by reducing state chartering burdens through lax legislation.
2. Without the Federal Reserve Banks possessing discretion to deny or reject a master account application, state chartering laws would be the only layer of insulation for the U.S. financial system.
3. The judge highlighted the importance of maintaining strict regulations and oversight to prevent minimally regulated institutions from gaining easy access to the central bank’s balances and Federal Reserve services.