The collapse of the Silicon Valley bank puts a spotlight on Trump’s banking law

WASHINGTON — The failures of Silicon Valley Bank and Signature Bank have led to fresh scrutiny of a 2018 law that overturned some banking regulations, with some Democrats calling for those rules to be restored while the federal government steps in to protect depositors from SVB.

“Congress, the White House, and banking regulators should reverse the dangerous Trump-era bank liberalization. Repeal of the 2018 legislation that weakened rules for banks like SVB should be an immediate priority for Congress,” Sen. Elizabeth Warren, D-Massachusetts. , wrote in a The New York Times Monday opinion article.

Rep. Katie Porter, D-Calif., who is running for Senate, said she is working on legislation in the House of Representatives to reverse the 2018 law, which was led by Republicans and signed into law by then-President Donald Trump.

“Congress – in a bipartisan vote – has acquiesced to Wall Street and watered down our country’s banking laws. I have no problem standing up to Wall Street, so I am writing legislation to reverse this risky law,” she wrote in an email to her supporters on Sunday.

President Joe Biden also said in a speech Monday announcing the federal action that the Deregulation Act played a role and called on Congress to tighten bank rules.

“During the Obama-Biden administration, we put tough conditions on banks, such as Silicon Valley Bank and Signature Bank, including the Dodd-Frank Act to make sure that the crisis we saw in 2008 does not happen again,” he said. “Unfortunately, the recent administration has backed away from some of these requirements. I will be asking Congress and banking regulators to strengthen rules for banks to reduce the likelihood of this type of bank failure happening again and to protect American jobs and small business.”

Conflict over the 2018 law

Five years ago, Warren was an outspoken opponent of Republican-led congressional pressure to roll back regulations imposed by the 2010 Dodd-Frank Act on small and medium-sized banks. The bill, spearheaded by the Republican senator from Idaho, sought to reclassify the “too big to fail” standard, which came with improved regulatory scrutiny. By raising the threshold from $50 billion in assets to $250 billion, medium-sized banks were exempted from those regulations.

“Had Congress and the Federal Reserve not rolled back on stricter oversight, SVB and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks,” Warren wrote Monday. “They would have been required to conduct regular stress tests to expose their weaknesses and support their business. But since those requirements were scrapped, when old-fashioned bank management hit SVB‌, the bank could not stand the pressure — and Signature’s collapse was imminent.”

Sen. Bernie Sanders, who also opposed the 2018 law, blamed it for the collapse of the 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 that I vehemently opposed,” he said in a statement. It would “increase the probability of failure of a large financial company with assets between $100 billion and $250 billion.”

The 2018 battle was marked by intense lobbying by banks – including a Silicon Valley bank and a group of smaller community banks – that were seeking regulatory help.

In the Senate, she needed some Democrats to defeat the filibuster and achieve 60 votes. Warren angered some colleagues when she called out some Senate Democrats by name for trying to weaken Dodd-Frank rules.

Tensions boiled over to a contentious March 2018 meeting between the Senate Democratic chiefs of staff before the vote, according to two sources familiar with the closed-door clash.

One source said that Dan Gildon, who was Warren’s boss at the time, “took a break” from other chiefs who were angry that Warren was making their bosses a target. Gildon stood his ground, the two sources said, telling them that oversight of the banks was a matter of signing for her and that no one should be surprised that she would call out those who wanted to roll back Dodd-Frank.

One of the sources said it was an “unusual meeting of the chiefs”. The other said he was so hot he felt like “throwing off the chair.” Days later, 17 Democrats join Senate Republican convention unanimously to pass it. I cleaned the house 258-159It was won by 225 Republicans and 33 Democrats. Trump signed it into law.

Gildon declined to comment on the meeting.

“appropriate level of organization”

One of those Democrats, Sen. Mark Warner of Virginia, defended the legislation Sunday when asked if he regretted supporting it.

“I think these mid-sized banks need some regulatory easing,” Warner said on ABC’s “This Week,” adding that the law “put an appropriate level of regulation on mid-sized banks.”

Warner said there would be “a lot of time to look back on what regulators did and didn’t do, and why bank management just didn’t get it right.” He described it as a matter of “Banking 101, managing interest rate risk”.

“What we have to focus on now is how do we make sure there is no infection and at the same time, you know, we think SVB can be acquired,” he said.

Sen. Kevin Cramer, the national GOP, who voted for the 2018 law when it was in the House, also supported it.

“They certainly don’t need more regulation. That doesn’t mean you can be mismanaged,” he said Sunday on NBC’s “Meet the Press.” “We’ve seen a fairly sharp increase in interest rates, which has put some of the smaller banks at odds with their balance sheet. And now, of course, we have the Fed trying to shake up 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 smaller banks need more oversight and more regulation – maybe better supervision, but certainly not more regulation.”

Another supporter of the bank deregulation measure was Senator Kirsten Sinema, ie, Arizona, who was a member of the House of Representatives and a candidate for Senate at the time.

Rep. Ruben Gallego, D-Arizona, who is running for the seat of Cinema in 2024, voted against the 2018 legislation and issued a statement Monday. attack Ha.

“What is the difference between me and Senator Sinema?” Gallego said. When bank lobbyists asked me to weaken banking regulations, I said no. When they asked Senator Sinema, she asked how much she voted yes. Now we will all pay for her mistake.”