Last year they were scolded, and now big banks likely feel emboldened after great news about their holdings.

US regulators are massively scaling back on plans to raise capital requirements for the country’s banks: The proposal to hike holdings for the biggest lenders to buttress market shocks was sliced in more than half, Fed vice chair for supervision Michael Barr announced Tuesday.

Know When to Hold ‘Em, Know When to Lobby ‘Em

Last year’s joint proposal by the Fed, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency to hike capital holdings requirements for America’s eight largest banks by 19% was met with one of Wall Street’s fiercest DC lobbying campaigns in recent memory. It also left Fed officials at loggerheads: Fed Govs. Michelle Bowman and Chris Waller both said the plan needed changes and expressed worries, shared by the industry, that it would make the country’s banks less competitive, hurting performance and profitability. Under the revised proposal, the eight big banks — which include Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, and Wells Fargo — would face a 9% increase in the capital they must hold as a cushion against financial shocks.

The proposal is in line with the Basel III accord, an international framework hammered out after the 2008 global financial crisis that’s meant to stop another run of potential bank failures. The updated version, however, will ease up on more than just the biggest banks:

• Barr, who unveiled the changes in a speech at the Brookings Institution, said other large banks impacted by the rule would see 3% to 4% increases in capital requirements. Banks would also have to recognize unrealized gains and losses on their securities holdings as part of regulatory capital requirements.
• Smaller banks — those with assets between $100 billion and $250 billion — will only have to recognize their unrealized portfolio gains and losses, and won’t be subject to the Basel III-related hikes.

Don’t Put Any Stock In It: Major bank stocks still took a tumble Tuesday, though that may have been a result of comments by JPMorgan President and COO Daniel Pinto, who told a conference that analyst expectations of the industry are “not very reasonable” and that income “will be lower” next year. His remarks came a day after Goldman Sachs CEO David Solomon said trading revenue is on pace to fall 10% in the current quarter. JPMorgan and Goldman shares were down 5.2% and 4.4%, respectively.

Oh Danny Boy, the tax, the tax is calling…

On Tuesday, Apple lost a court case it’s been fighting for eight years over a €13 billion ($14.3 billion) EU tax bill, and on the same day Google lost an appeal against a €2.4 billion ($2.6 billion) antitrust fine. The EU has arguably landed the most regulatory body-blows on US Big Tech companies, but those companies have spent years appealing and dragging the rulings through the courts. Now it looks like they can’t kick the can any farther down the road.

The Tax Lady Cometh

Apple’s case dates back to a 2016 ruling from the EU, which found that Ireland had broken European rules on state aid by offering Apple too generous of a corporate tax break, and ordered the country to collect the €13 billion in back taxes. Google’s fine, meanwhile, stems from a 2017 antitrust ruling that found it had abused its dominant position as a search engine to give its shopping service an unfair advantage.

Both rulings were the result of actions brought by Danish EU Commissioner Margrethe Vestager, a Big Tech hawk whom former President Trump once dubbed Europe’s “tax lady.” Vestager, who’s been a commissioner since 2014, is due to step down soon because her political party in Denmark has lost power, but Tuesday’s rulings cement her legacy, and they’re only the first pebbles in the avalanche:

• Vestager fined Google a record-breaking $5 billion in 2018 for breaking antitrust laws with its Android operating system for phones. 
• On top of the actual pain of parting with billions, there’s the uncomfortable and restrictive precedents that the EU rulings set for the companies’ business practices. This comes as Google is facing a new antitrust trial from the US Department of Justice over its advertising tech.

Victory Lap: Bloomberg reported that Vestager waxed victorious following Tuesday’s Apple ruling, telling reporters: “It’s important to show European taxpayers that once in a while, tax justice can be done.” 

Elliott Management: You’re cleared for takeoff.

The famed activist investor group scored a major victory in its quest to oust much of the board at Southwest Airlines, with chairman and longtime company executive Gary Kelly announcing his retirement amid broader board turnover. Next up on the agenda for Elliott: overhauling what it sees as an outdated business strategy.

Boarding Process

Elliott announced its activist campaign back in June, built on a roughly $2 billion, 10% stake in the storied airline. Its presence was felt nearly immediately. By the end of July, Southwest announced the end of its free-for-all open-seating process, upending over 50 years of company tradition in the process.

Then, last month, Elliott upped the stakes again, announcing it would launch a proxy battle for the company’s board, with ambitions to replace 10 of the board’s 15 members. On Tuesday, part of that plan finally became reality:

• In addition to Kelly — who transitioned from CEO to chairman in 2022 and said in a letter to shareholders after meeting with Elliott this week that the latter position was always meant to be transitional — Southwest announced Tuesday that six board members would be resigning in November.
• Southwest says it would replace up to three of those members with candidates Elliott proposed in August. The airline has continued to defend CEO Bob Jordan, despite him being in Elliott’s crosshairs.

“The need for thoughtful, deliberate change at Southwest remains urgent, and we believe the highly qualified nominees we have put forward are the right people to steady the Board and chart a new course for the airline,” Elliott representatives said in a statement that also called the resignations “unprecedented.” Shares of Southwest fell around 1.7%.

Clipped Wings: Southwest’s problems remain numerous. A delay in Boeing deliveries has crunched its expansion efforts, and, unlike many industry peers, the historically low-cost airline has struggled to cash in on the premium seating boom. As part of the turnaround effort, Southwest has tapped former Spirit Airlines CEO Robert Fornaro as an outside advisor — though we’re not entirely sure how the leader of the airline known for cramped seats and no free water is well-suited to give advice on building a better First Class experience.