WASHINGTON — The failures of Silicon Valley Bank and Signature Bank are putting new scrutiny on a 2018 law that struck down some banking regulations, and some Democrats are calling for restoring those rules as the federal government steps in to protect SVB depositors.
«Congress, the White House and bank regulators should reverse dangerous Trump-era bank deregulation. Repealing 2018 legislation that weakened rules for banks like SVB should be an immediate priority for Congress,» said Senator Elizabeth Warren. , Democrat from Massachusetts. , she wrote herself in a New York Times opinion piece on Monday.
Rep. Katie Porter, D-Calif., who is running for the Senate, said she is working on legislation in the House to reverse the 2018 law, which was led by Republicans and signed by then-President Donald Trump.
«Congress, in a bipartisan vote, caved to Wall Street and relaxed our nation’s banking laws. I have no problem taking on Wall Street, so I’m writing legislation to reverse that risky law,» he wrote in an email to his fans on Sunday. .
President Joe Biden also said in a speech Monday announcing federal action that deregulation law played a role and called on Congress to tighten banking rules.
“During the Obama-Biden administration, we put strict requirements on banks like Silicon Valley Bank and Signature Bank, including the Dodd-Frank law to make sure the crisis we saw in 2008 doesn’t happen again,” he said. «Unfortunately, the last administration removed some of these requirements. I am going to ask Congress and banking regulators to strengthen the rules for banks to make it less likely that this type of bank failure will happen again and to protect American jobs and small companies». business».
The fight for the 2018 law
Five years ago, Warren was the most outspoken opponent of a push by the Republican-led Congress to undo regulations imposed under the 2010 Dodd-Frank law for small and midsize banks. The bill, spearheaded by Sen. Mike Crapo, R-Idaho, sought to reclassify the «too big to fail» standard, which came with increased regulatory scrutiny. By raising the threshold from $50 billion in assets to $250 billion, midsize banks were exempted from those regulations.
“Had Congress and the Federal Reserve not rolled back the tighter supervision, SVB and Signature would have been subject to tighter liquidity and capital requirements to withstand financial shocks,” Warren wrote Monday. “They would have been required to perform regular stress tests to expose their vulnerabilities and shore up their businesses. But because those requirements were repealed, when an old-fashioned bank run hit SVB., the bank could not withstand the pressure, and Signature’s collapse was very close.
Sen. Bernie Sanders, I-Vt., who also opposed the 2018 law, blamed it for the collapse of Silicon Valley Bank.
«Let’s be clear. The failure of Silicon Valley Bank is a direct result of a ludicrous 2018 banking deregulation bill signed by Donald Trump that I strongly opposed,» he said in a statement. «Five years ago, the Republican director of the Congressional Budget Office released a report saying this legislation would ‘increase the likelihood that a large financial firm with assets between $100 billion and $250 billion will go bankrupt.’”
The 2018 battle featured intense lobbying by banks, including Silicon Valley Bank and a variety of smaller community banks, seeking regulatory relief.
In the Senate, it took a few Democrats to defeat a filibuster to 60 votes. Warren angered some colleagues when he called out some Senate Democrats for trying to weaken the Dodd-Frank rules.
The tensions led to a contentious meeting in March 2018 between Democratic Senate chiefs of staff before the vote, according to two sources familiar with the closed-door confrontation.
Dan Geldon, who was Warren’s boss at the time, «took a beating» from other bosses who were angry that Warren was targeting their bosses, a source said. Geldon stood her ground, telling them that banking supervision was a signature issue for her and that no one should be surprised that she called out those who want to reverse Dodd-Frank, both sources said.
One of the sources said it was an “abnormally contentious bosses meeting”. The other said it was so hot it felt «like knocking over a chair.» Days later, 17 Democrats United a unanimous Republican Senate conference to pass it. he cleared the house 258-159, winning 225 Republicans and 33 Democrats. Trump signed it into law.
Geldon declined to comment on the meeting.
‘Appropriate level of regulation’
One of those Democrats, Sen. Mark Warner of Virginia, defended the legislation Sunday when asked if he regretted supporting it.
«I think these midsize banks needed some regulatory relief,» Warner said on ABC’s «This Week,» adding that the law «established an appropriate level of regulation on midsize banks.»
Warner said there would be «plenty of time to review what the regulators did and didn’t do, and why the bank’s management didn’t get it right.» He called it a matter of «banking 101, interest rate risk management.»
“And what we have to focus on now is how do we make sure that there is no contagion and at the same time believe that you can get BLS,” he said.
Sen. Kevin Cramer, RN.D., who voted for the 2018 law while in the House, also supported it.
“They certainly don’t need more regulation. That doesn’t mean it can be mismanaged,” he said on NBC’s “Meet The Press” Sunday. «We’ve seen a pretty sharp rise in interest rates, which has put some smaller banks at odds with their own balance sheets. And now, of course, we have the Federal Reserve trying to change their balance sheet at the same time. And maybe we need to do a little more review of all of that. But I don’t think the smaller banks need more supervision and more regulation, maybe better supervision, but certainly not more regulation.»
Another proponent of the bank deregulation measure was Sen. Kyrsten Sinema, I-Ariz., who was a House member running for Senate at the time.
Rep. Ruben Gallego, D-Ariz., who is running for Sinema’s seat in 2024, voted against the 2018 legislation and issued a statement Monday aggressor his.
«What is the difference between me and Senator Sinema?» Gallego said. “When bank lobbyists asked me to loosen bank regulations, I said no. When Senator Sinema was asked, she asked how much and she voted yes. Now we are all going to pay for her mistake.