SVB collapse: Progressives unveil bill to undo Trump-era rollback of Dodd-Frank
Ryan King
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A group of progressive Democrats led by Sen. Elizabeth Warren (D-MA) and Rep. Katie Porter (D-CA) unveiled a bill on Tuesday to revive Dodd-Frank regulations that were rolled back during the Trump administration.
The legislation would resurrect the threshold set for stress tests and capital rules that had been eased for small and mid-sized banks in light of the recent collapse of Silicon Valley Bank and other institutions.
SVB COLLAPSE: DIRECTOR OF FAILED BANK WAS AUTHOR OF DODD-FRANK REFORM LAW
“President Biden called on Congress and regulators to reverse Trump-era deregulation and ‘strengthen the rules on banks to make it less likely that this kind of bank failure will happen again.’ Today I’m proposing legislation to do just that,” Warren tweeted.
https://twitter.com/SenWarren/status/1635749353846349826?s=20
Back in 2018, Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act, which upped the Dodd-Frank threshold from $50 billion to $250 billion for banks that were considered “too big to fail.” SVB had a balance sheet of roughly $209 billion in assets, making it the 16th-largest federally insured bank in the United States.
The Dodd-Frank Act was a regulatory regime implemented by Congress in the wake of the 2008 financial crisis. Seventeen Senate Democrats joined their Republican counterparts in 2018 in backing the easing of its rules. Supporters argued that Dodd-Frank was too stringent for smaller-sized banks.
Former Rep. Barney Frank (D-MA), who co-authored the 2010 Dodd-Frank financial reform package and was the director of Signature Bank, another institution that failed over recent days, appeared to back the easing of restrictions as “mostly” reasonable at the time.
Warren and Porter, her former student and protege who is running for California’s Senate seat, are joined by Sens. Tammy Baldwin (D-WI), John Fetterman (D-PA), and Bob Casey (D-PA), as well as Reps. Pramila Jayapal (D-WA), Ro Khanna (D-CA), and Ruben Gallego (D-AZ), in the effort to advance the bill, NBC reported.
A handful of Democrats have signaled that they stand by their 2018 vote, including Sens. Mark Warner (D-VA) and Jeanne Shaheen (D-NH).
SVB was taken over by regulators Friday after weathering a bank run. The company announced last Wednesday that it was forced to sell $21 billion in bonds, cementing $1.8 billion in previously unrealized losses, then revealed plans to pursue $2.25 billion in additional equity, which spooked customers. On Thursday, $42 billion was withdrawn in a single day.
Government officials announced plans over the weekend to ensure that depositors would have access to their money, a move that was intended to allay panic that could ripple through the financial sector. The Federal Deposit Insurance Corporation insures deposits up to $250,000, but SVB was filled with ones above that threshold.
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On Monday, President Joe Biden committed to “strengthen oversight and regulation of larger banks so that we are not in this position again.”
The odds of Warren and Porter’s bill becoming law are unclear, as they would need to overcome the 60-vote filibuster threshold and pass a Republican-controlled House.