WASHINGTON — The failures of Silicon Valley Bank and Signature Bank have come under fresh scrutiny over a 2018 law that rolled back some banking regulations, with some Democrats calling for the restoration of those rules as the federal government moves to protect SVB depositors.
“Congress, the White House and banking regulators must reverse dangerous Trump-era banking regulations. Repealing the 2018 law that weakened rules for banks like SVB should be an immediate priority for Congress,” Sen. Elizabeth Warren, D-Mass. , wrote a The New York Times Comment Section Monday.
Rep. Katie Porter, D-Calif., who is running for the Senate, said the House is working on legislation to replace the 2018 law, led by Republicans and signed by then-President Donald Trump.
“Congress—in a bipartisan vote—pushed over Wall Street and loosened our nation’s banking laws. I have no problem standing up to Wall Street, so I’m writing legislation to reverse that dangerous law,” he wrote in a Sunday email to supporters. .
In a speech announcing the federal measures on Monday, President Joe Biden said the deregulation act played a role and called on Congress to tighten banking rules.
“During the Obama-Biden administration, we put tougher requirements on banks like Silicon Valley Bank and Signature Bank, including the Dodd-Frank Act, to make sure the crisis we saw in 2008 doesn’t happen again,” he said. “Unfortunately, the last administration rolled back some of these requirements. I urge Congress and bank regulators to strengthen rules for banks to prevent bank failures like this from happening again and to protect American jobs and small. businesses.”
Protest against the 2018 Act
Five years ago, Warren was the most outspoken opponent of a push by the Republican-led Congress to repeal regulations imposed on small and medium-sized banks under the 2010 Dodd-Frank Act. Sen. The bill, led by Rep. Mike Crapo, R-Idaho, sought to reclassify the “too big to fail” standard that came with enhanced regulatory scrutiny. Mid-sized banks were exempted from those regulations by raising the limit from $50 billion in assets to $250 billion.
“If Congress and the Federal Reserve do not withdraw strict oversight, SVB and Signature will be subject to strong liquidity and capital requirements to withstand financial shocks,” Warren wrote Monday. “They used to have to conduct regular stress tests to expose their vulnerabilities and improve their businesses. But with those requirements scrapped, when the old-fashioned bank run hit SVB, the bank couldn’t withstand the pressure – and Signature’s collapse was behind it.
Sen who opposed the 2018 Act. Bernie Sanders, I-Vt., blamed it for the collapse of Silicon Valley Bank.
“Let’s be clear. “The failure of Silicon Valley Bank is a direct result of the ridiculous 2018 deregulation bill signed by Donald Trump, which I strongly opposed,” he said in a statement. “Five years ago, the Republican director of the Congressional Budget Office issued a report that found the law would ‘increase the likelihood that a large financial institution with $100 billion to $250 billion in assets will fail.'”
The 2018 battle featured intense lobbying by banks — including Silicon Valley Bank and an array of smaller community banks — seeking regulatory relief.
In the Senate, a few Democrats needed 60 votes to defeat a filibuster. Warren angered some colleagues when she called out some Senate Democrats by name for trying to weaken the Dodd-Frank rules.
Tensions boiled over in a contentious March 2018 meeting among Senate Democratic leaders before the vote, according to two sources familiar with the closed-door conflict.
One source said Dan Kelton, Warren’s boss at the time, “took a clobbering” from other leaders who were angry that Warren was targeting their bosses. Kelden stood his ground, telling them that bank oversight is a signature issue for him and that no one should be surprised that he’s calling out those who want to roll back Dodd-Frank, the two sources said.
One of the sources said it was “an unusually contentious meeting of leaders”. Another said it was so hot she felt “like throwing a chair”. A few days later, 17 Democrats joined A unanimous Senate Republican convention to pass it. It emptied the council 258-159It won 225 Republicans and 33 Democrats. Trump signed.
Kelton declined to comment on the meeting.
‘Appropriate regulatory status’
One of those Democrats, Virginia Sen. Mark Warner backed the legislation on Sunday when asked if he regretted supporting it.
“I think these mid-sized banks need some regulatory relief,” Warner said on ABC’s “This Week,” adding that the law “put the right amount of regulation into the mid-sized banks.”
“There’s going to be a lot of time looking back at what regulators did and didn’t do and why the bank management didn’t get this right,” Warner said. He called it “Banking 101, Managing Interest Rate Risks.”
“What we have to focus on now is how to make sure that there is no epidemic, and at the same time, you know, that SVB can be acquired,” he said.
Sen. Kevin Cramer, R-N.D., who voted for the 2018 legislation while he was in the House.
“They certainly don’t need any restrictions. It doesn’t mean you’re going to be mismanaged,” he said Sunday on NBC’s “Meet The Press.” “We’ve seen a sharp increase in interest rates, which has put some of the smaller banks at odds with their own balance sheets. Now, of course, the Federal Reserve is trying to change its balance sheet at the same time. Maybe we need to review all of that a little bit more. But the smaller banks need more oversight and I don’t think there’s a need for more regulation — perhaps better oversight, but certainly not more regulation.”
Another supporter of the deregulation measure, Sen. Kirsten Sinema, I-Ariz. He was a member of the House and ran for the Senate at the time.
Rep. Ruben Gallego, D-Ariz., who is running for Cinéma’s seat in 2024, issued a statement Monday saying he voted against the 2018 legislation. attacking her.
“What’s the difference between Senator Cinema and me?” Gallego said. “When banking lobbyists asked me to weaken banking regulations, I said no. When they asked Senator Sinema, he asked how much – and voted yes. Now we are all going to pay for her mistake.