Sen. Elizabeth Warren and Rep. Katie Porter unveiled legislation Tuesday to repeal the section of a Trump-era law that weakened regulations for banks with between $50 billion to $250 billion in assets, a move that experts and lawmakers have blamed for the collapse of Silicon Valley Bank and the resulting turmoil.
“In 2018, I rang the alarm bell about what would happen if Congress rolled back critical Dodd-Frank protections: banks would load up on risk to boost their profits and collapse, threatening our entire economy—and that is precisely what happened,” Warren, D-Mass., said in a statement. “President Biden called on Congress to strengthen the rules for banks, and I’m proposing legislation to do just that by repealing the core of Trump’s bank law.”
That law, authored by Sen. Mike Crapo, R-Idaho, and backed by dozens of Democrats, raised the asset threshold for more stringent regulations to $250 billion or higher, exempting firms such as Silicon Valley Bank (SVB)—a major venture capital lender that controlled around $212 billion—from enhanced liquidity requirements and more frequent federal stress tests imposed on banks considered “systemically important.”
SVB’s leadership specifically lobbied for the higher threshold, insisting the tougher regulations were unnecessary even as experts and lawmakers raised concerns that gutting them would increase the risk of bank failures and cascading effects on the financial system.
“Americans deserve to know their money is safe when they deposit it in the bank,” Porter, D-Calif., said Tuesday. “In 2018, politicians rolled back critical regulations protecting Americans’ deposits—ignoring warnings from financial experts in favor of Wall Street special interests. I’m calling on Congress to restore commonsense guardrails that keep corporate greed in check and restore confidence in our financial system.”
Titled the Secure Viable Banking (SVB) Act, Warren and Porter’s legislation would place more stringent regulations on institutions like Silicon Valley Bank by reviving safeguards for firms with between $50 billion and $250 billion in assets.
Facing backlash from Warren and others for glaring oversight failures, the Federal Reserve is considering stronger regulations for banks with between $100 billion and $250 billion in assets, Reuters reported late Tuesday.
Warren and Porter introduced their bill with the support of 31 Democrats in the House and 17 members of the Senate Democratic caucus, including Sens. Bernie Sanders, I-Vt., and Ed Markey, D-Mass.
“Taxpayers should not have to pay for the mistakes and mismanagement of big bank executives,” Markey said in a statement. “The American people should have confidence in their financial institutions, and that starts with undoing Trump-era deregulation so that we can ensure a collapse like we saw last week never happens again.”
Notably absent from the list of co-sponsors were the Democrats who helped Republicans usher the bill through Congress in 2018, often misleadingly arguing that the measure was chiefly about providing relief for “community banks.”
In the Senate, 16 Democrats and Sen. Angus King, I-Maine, supported the bill, giving Republicans the votes they needed to overcome the chamber’s legislative filibuster.
One of the Democratic supporters, Mark Warner of Virginia, defended the 2018 law over the weekend, telling ABC News that he believes it “put in place an appropriate level of regulation on mid-sized banks” and that “these mid-sized banks needed some regulatory relief.”
The Lever reported last week that SVB chief Greg Becker held a fundraiser for Warner in 2016.
“The bank’s political action committee also donated a total of $10,000 to Warner’s campaigns in the 2016 and 2018 election cycles,” the outlet noted.
Sen. Jon Tester, D-Mont., another major backer of the 2018 law, held a fundraiser in Silicon Valley earlier this week, just days after SVB collapsed.
Source : https://www.salon.com/2023/03/15/threatening-our-entire-economy-warren-introduces-bill-to-repeal-law_partner/