Dennis Kelleher has spent the past decade building a reputation as one of Washington’s toughest critics of big banks. As chairman and CEO of Better Markets, which he co-founded in the aftermath of the 2008 financial crisis, Kelleher championed tough rules for mega-banks and criticized regulators for complying with the demands of industry.

So it’s a measure of how much the world has changed over the past month that Kelleher is now arguing that the Federal Reserve should raise its asset cap on Wells Fargo.

Wells Fargo has been barred from growing its assets above $ 1.95 trillion for more than two years, but now officials are asking the Fed to suspend the cap, at least temporarily, to give it more flexibility to lend during the coronavirus crisis.

Kelleher agrees, saying in an interview this week that this temporary lifting of the cap would boost much-needed loans. The Federal Reserve “should take advantage of the knowledge and abilities of those who know the small business community best,” said Kelleher, who has clarified some conditions he wants the Fed to put in place.

The Fed has imposed an asset cap on Wells Fargo following a series of scandals, including revelations that employees have opened millions of accounts receivable without authorization.

The question of whether to raise the asset ceiling in times of crisis – and if so, according to what parameters? – may pose a conundrum for the Fed. The central bank should decide when the imperatives of an economic emergency trump the demands of its toughest enforcement measures in recent memory.

A Fed spokesperson declined to comment for this article. Wells Fargo said in a statement that the bank is focused on meeting the Fed’s requirements. “In these difficult times, we are striving to do all we can for our clients while operating under the constraints of the asset cap,” the bank’s statement read.

Prior to the current crisis, Fed Chairman Jerome Powell made some promises about what should happen before the asset cap is lifted. These remarks could limit the central bank’s capacity for improvisation.

Powell promised, for example, that the Board of Governors would hold a vote on whether to lift the asset cap. He also said the board has no intention of removing the cap until Wells Fargo implements sufficient corrective measures. The Fed’s order of 2018 identified problems both in the bank’s risk management program and in the oversight of the company by its board of directors.

Earlier this week, Bloomberg reported that Wells had confidentially warned the Fed that it would not meet the April deadline to submit an improvement plan. And last month, CEO Charlie Scharf said in testimony to Congress that he thought the asset cap was appropriate. “I am focused on doing the work required by the Federal Reserve,” he said in testimony on March 10.

For now, the Fed does not appear to be moving quickly to lift the asset ceiling, even temporarily.

“The problem is, the CEO right in front of Congress says he needs to do more,” said Brian Kleinhanzl, analyst at Keefe, Bruyette & Woods. “So that puts the Fed in a tough spot. “

But Kleinhanzl predicted that the Fed will become more inclined to temporarily lift the cap if financial market conditions continue to deteriorate.

It is not clear to what extent Wells Fargo’s lending capacity is currently constrained by the two-year asset cap. Over the past eight quarters, the San Francisco Bank’s quarterly assets have remained below $ 70 billion of the $ 1.95 trillion cap. Compliance with the ceiling is measured on a daily average over two quarters to allow management of temporary fluctuations, said the bank.

Analysts said this week that Wells Fargo may take certain steps to free up lending capacity, including selling assets. They also noted that while demand for industry-wide loans in some categories has increased, part of this increase could be offset by reduced demand in other asset categories.

“We don’t know exactly what the level of loan demand is at this point,” said Allen Tischler, analyst at Moody’s Investors Service.

One area where banks have faced unusually strong demand is for business loans, as many businesses are using their existing lines of credit, either as a precaution or because their income was hit hard last month. In the week ending March 18, outstanding commercial and industrial loans in the banking sector increased by $ 176 billion from the previous week, according to data from the Fed. Total bank lending was up $ 267 billion from the week ending March 11.

For its part, Wells Fargo declared $ 347 billion in unfunded credit commitments for commercial and industrial loans at the end of last year. Unfunded liabilities are not recorded on the bank’s balance sheet, but once funded they are recorded as assets.

As U.S. consumers and businesses brace for the rainy days ahead, the asset cap could hamper Wells Fargo’s ability to meet loan demand, said Bain Rumohr, analyst at Fitch Ratings. “In theory, there might be a point at which they might not be able to participate in this build-up,” he said.

The Fed, which has taken a series of dramatic steps in recent weeks to maintain credit, is under severe political scrutiny over its handling of Wells Fargo. Representative Maxine Waters, D-Calif., Sent a letter to Powell last week requesting a briefing on the Fed’s deliberations regarding any potential removal of the asset cap.

Waters chairs the House Financial Services Committee, and last month Democratic panel staff released a detailed report that criticized Wells Fargo’s previous leadership for its focus on raising the Fed’s asset ceiling, rather than weaknesses. of the bank’s risk management.

Better Markets’ Kelleher said the COVID-19 crisis offers Wells Fargo an opportunity to show that it has changed during Scharf’s nearly six-month tenure as CEO. “It’s kind of an acid test for the new management,” he said.

He proposed that the Fed temporarily lift the asset cap while forcing Wells Fargo to lock in loans it makes under the $ 2.3 trillion emergency relief legislation that President Trump signed last week. .

Kelleher also suggested that Wells Fargo voluntarily offer to provide small business credit at cost or at no cost, in order to help its customers in times of crisis.

“My take is this: if they did that, it would demonstrate to the Fed and everyone else that this is a new bank,” he said. “And this should be taken into account when evaluating the permanent release of the plug.”