WASHINGTON — The failure of Silicon Valley Bank and Signature Bank is drawing new scrutiny over a 2018 law that rolled back some banking rules, with some Democrats calling for reinstating those rules as a Fed move to protect depositors. Did.
“Congress, the White House and banking regulators must reverse the dangerous bank regulation of the Trump era. Repeal of the 2018 law that weakened rules for banks like SVB must be an immediate priority for Congress,” Sen. Elizabeth Warren, D-Mass. . , wrote in an opinion piece for the New York Times on Monday.
Rep. Katie Porter, D-Calif., who is running for 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 Were.
“Congress — in a bipartisan vote — sided with 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 risky law.” I am,” Porter wrote in an email to supporters. sunday.
President Joe Biden announced the federal actions in a speech Monday, saying deregulation legislation played a role and calling on Congress to tighten bank rules.
“During the Obama Biden administration, we placed stricter requirements on banks like Silicon Valley Bank and Signature Bank, including the Dodd-Frank Act, to ensure that the crisis we saw in 2008 did not happen again ” “Unfortunately, the previous administration rolled back 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 American jobs and small businesses.”
Battle over the 2018 law
Five years ago, Warren was the most vocal opponent of the Republican-led Congress’ bid to undo rules imposed under the 2010 Dodd-Frank law for small and medium-sized banks. The bill, led by Sen. Mike Crapo, R-Idaho, sought to reclassify the “too big to fail” standard, which came with increased regulatory scrutiny. Medium-sized banks were exempt from those regulations, raising the limit from $50 billion to $250 billion in assets.
“Had Congress and the Federal Reserve not withdrawn strict oversight, SVB and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks,” Warren wrote on Monday. “They would have needed to do regular stress tests to uncover their weaknesses and grow their business. But because those requirements were repealed when an old-fashioned bank hit SVB, the bank could not withstand the pressure – and Signature’s collapse was nigh.
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 the Silicon Valley bank is a direct result of an absurd 2018 bank deregulation bill signed by Donald Trump, which I strongly opposed,” Sanders said in a statement. Five years ago, the Republican director of the Congressional Budget Office released a report that found the law would ‘increase the likelihood that a large financial firm with between $100 billion and $250 billion in assets will fail.'”
The 2018 battle saw intense lobbying by banks — including Silicon Valley banks and an array of smaller community banks — seeking regulatory relief.
The bill passed the House 258–159, won by 225 Republicans and 33 Democrats. In the Senate, he needed some Democrats to defeat the filibuster and get 60 votes. Warren angered some allies when she called out some Senate Democrats by name for trying to undermine the Dodd-Frank rules.
Ultimately, 17 Democrats joined a unanimous Senate Republican convention to pass it. Trump signed into law.
‘Reasonable level of regulation’
One of those Democrats, Sen. Mark Warner of Virginia, defended the legislation on Sunday when asked if he regretted supporting it.
“I think these medium-sized banks need some regulatory relief,” Warner said on ABC’s “This Week,” adding that the law “imposes a reasonable level of regulation on medium-sized banks.”
Warner said that “there will be plenty of time to look back on what the regulators did and didn’t do, and why bank management didn’t get this right.” He called it a case of “Banking 101, managing interest rate risks”.
“And what we have to focus on right now is how do we make sure there is no contagion, and also, you know, believe SVB can be acquired,” he said.
Sen. Kevin Cramer, RN.D., who voted for the 2018 legislation while in the House, also stood by it.
“They certainly don’t need any more regulation. That doesn’t mean you can be mismanaged,” Cramer 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 balance sheets. And now, of course, we have the Federal Reserve trying to transform their balance sheets at the same time.” And maybe we need to review all of that a little bit more. But I don’t think smaller banks need more oversight and more regulation – maybe better oversight, but certainly not more regulation.”