Better Markets, the nonprofit financial reform advocacy group, sued the Federal Reserve and Vice Chair for Supervision Michelle Bowman on September 10, alleging that Bowman held undisclosed meetings with the chief executives of the largest Wall Street banks during the public comment period on the Fed’s 2026 capital rules proposal, and coached them on what to say and what to leave out of their formal comments.

The complaint, filed in the U.S. District Court for the District of Columbia, asks the court to throw out the proposal, order the Fed to restart the rulemaking under an unbiased official, and bar everyone involved in the alleged coordination from further participation in it. “The Fed’s Vice Chair for Supervision, Michelle Bowman, and others from the Fed secretly met with the CEOs of the biggest, most dangerous banks on Wall Street and coached them to rig the Fed’s own rulemaking,” said Dennis Kelleher, Co-Founder, President and CEO of Better Markets, in a statement announcing the suit. “That’s not regulation or supervision. That’s corruption.”

For fintechs and banks positioning themselves ahead of the eventual capital rule, which would raise common equity requirements for the largest banks by 1.4 percentage points while other changes cut the aggregate impact by 4.8 points, the lawsuit adds a genuine timing risk that has been mostly absent from planning conversations: a court could force the entire proposal back to square one months after institutions have already begun modeling their balance sheets against it. Better Markets has filed process challenges before without derailing a rule outright, but a court order to restart under a different Fed official would be a materially different outcome than the usual comment-and-revise cycle, and one that most capital planning teams have not modeled. Regardless of the outcome, the proposal is now unlikely to move on its original timeline. The same regulators are simultaneously rewriting third-party risk rules for fintech partners, and the disclosure gaps exposed by 2023’s bank failures remain a live theme in how willing courts and advocacy groups now are to challenge regulator conduct directly.

Source: Better Markets