But many congressional Democrats and advocates of banking regulation warned that loosening the regulations on important lenders was a recipe for another crisis, noting that the banks with $50 billion to $249 billion in assets weren’t inconsequential local entities. Other banks and their supporters in Congress made similar arguments. “Given the low risk profile of our activities and business model,” Becker wrote, having to deal with the Dodd-Frank regulations “would stifle our ability to provide credit to our clients without any meaningful corresponding reduction in risk.” He also argued that SVB, like other “mid-sized” banks, “does not present systemic risks.” The list included SVB, whose chief executive officer, Greg Becker, had urged Congress to raise the threshold.īecker argued in 2015 congressional testimony that imposing the regulations when a bank hit the $50 billion level would “unnecessarily” burden SVB, which then had assets approaching $40 billion, and require the company to spend time and money complying with rules instead of providing loans to job-creators. Still, the change from a standard $50 billion threshold to a standard $250 billion threshold was widely described as a major victory for banks with assets below $250 billion. The rollback law did give the Federal Reserve the right to choose to apply the regulations to particular banks with at least $100 billion in assets, and it said that banks that met that $100 billion threshold would still face “ periodic” Fed stress tests. Instead, among many other changes, the rollback law made the enhanced regulations standard only for banks with at least $250 billion in assets – only about a dozen banks at the time. The 2018 rollback got rid of the $50 billion threshold, which many banks had argued was needlessly encumbering them. These banks, which were deemed “systemically important” to the financial system, were required to undergo an annual Federal Reserve “stress test,” to maintain certain levels of capital (to be able to absorb losses) and liquidity (to be able to quickly meet cash obligations), and to file a “living will” plan for their quick and orderly dissolution if they were to fail. In short, the 2018 rollback freed some banks from policies put in place in the wake of the financial crisis of 20 to try to stop these banks and the financial system from crumbling.Ī 2010 law signed by then-President Barack Obama, widely known as Dodd-Frank, had created stricter regulations for banks with at least $50 billion in assets. Here’s a look at how the 2018 rollback affected banks like SVB, who supported that law in Congress, and what some analysts have to say about the extent to which the law might have contributed to the SVB situation. Trump, meanwhile, rejected any role in the SVB mess and his spokesperson has accused Democrats of trying to deceive the public to evade their own responsibility. President Joe Biden wasn’t as direct as Sanders in blaming the 2018 rollback for SVB’s implosion, but he, too, criticized the Trump law in his Monday comments on the banking system. Bernie Sanders of Vermont argued that the culprit was clear: an “absurd” 2018 law, signed by then-President Donald Trump, that rolled back regulations on banks of SVB’s size. Do not duplicate in any form without permission.After Silicon Valley Bank collapsed late last week following a run on the bank, Sen.
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