Warren bill would repeal 2018 deregulation, blame Democrats for crisis

U.S. Senator Elizabeth Warren (D-MA) speaks to reporters about codifying same-sex marriage on Capitol Hill in Washington, September 15, 2022.

Evelyn Hawkstein | Reuters

WASHINGTON — A group of Democratic senators introduced the new legislation Tuesday repealed the Trump-era bank deregulation they say created the conditions that allowed Silicon Valley banks to fail and close dramatically signature bank from friday.

Under the Dodd-Frank Act of 2010, the new law lowered the threshold for banks deemed “too big to fail” to receive enhanced federal oversight.

Under Dodd-Frank, stricter capital and liquidity requirements, known as “enhanced prudential standards,” apply to any bank with $50 billion or more in combined assets.

Immediately, mid-sized banks including SVB start lobbying for congressional exemption from stricter oversight rules. In 2018, lobbying paid off, with Republican majorities in the House and Senate voting to raise the bank asset threshold to $250 billionthen President Donald Trump signed into law.

In the Senate on Tuesday, Democratic Sen. Elizabeth Warren, D-Mass., drew a straight line From deregulation efforts in 2018 to failure of SVB and Signature in 2023.

“Weakened rules allow banks like SVB and Signature to take risks, grow profits, pay their executives, huge bonuses, and ultimately blow the banks to pieces,” Warren said.

Silicon Valley Bank has about $209 billion When the California Department of Financial Protection and Innovation closed the property on Friday Signature has $110.4 billion The assets when the New York Department of Financial Services took it over on Sunday.

A longtime critic of the banking industry, Warren was one of the main sponsors of new legislation that would lower the asset threshold for enhanced prudential measures to an original $50 billion level.

A similar bill was introduced in the House by Rep. Katie Porter, D-Calif., one of several members of the House vying for the seat of retiring Sen. Dianne Feinstein. Both bills have some Democratic co-sponsors, but the full list was not available Tuesday night.

“If Congress and the Federal Reserve do not remove key provisions of the Dodd-Frank Act, these banks will be subject to stricter liquidity and capital requirements … Regulators stand on their shoulders and look more closely at all aspects of the banking business. part,” Warren said. “But with Dodd-Frank removing those stringent requirements, when old-fashioned bank runs hit SVB, the bank couldn’t take the pressure,” she said.

Overnight collapse of SVB and Actions taken by regulators In an effort to stem a broader banking crisis, new divisions have emerged not just between Democrats and Republicans, but also between individual members of each party.

In the Senate, 13 members of the current Democratic caucus who joined the Republican Party in 2018 voted to roll back the Dodd-Frank regulation, including Virginia Sen. Mark Warner, who leads the Senate Intelligence Committee.

Warner has defended his 2018 vote in recent days, and his comments underscore the difficulty Warren may face in seeking to repeal the 2018 rule.

“I think it has the right level of regulation for mid-sized banks,” Warner said. explain His last weekend of 2018 voting. “These mid-sized banks need some regulatory easing,” he told ABC News’ “This Week.”

While the repeal bill’s path forward in the Senate is thorny, its path in the Republican-controlled House is nearly insurmountable.

House Speaker Kevin McCarthy, R-Calif., tweets The real culprit in Tuesday’s SVB and Signature debacle was the president joe biden’s economic agenda.

“Biden’s reckless spending has led to record inflation and rapidly rising interest rates, which have also broken household budgets and banks,” McCarthy wrote, adding: “We must return to fiscal sanity.”

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