SVB collapse: Schumer sidesteps whether he’d support Warren bill to regulate big banks
Cami Mondeaux
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Senate Majority Leader Chuck Schumer (D-NY) avoided questions on whether he would support a bill being proposed by Sen. Elizabeth Warren (D-MA) that seeks to reimplement Obama-era banking regulations after the collapse of Silicon Valley Bank over the weekend.
During a weekly press conference on Wednesday, Schumer declined to offer his view on the proposal, but he left the door open on passing legislation aimed at resolving the banking crisis.
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“We need strong legislation, and hopefully, we can get something bipartisan done,” the New York senator told reporters. “We need a thorough investigation as to what went wrong and hold those responsible accountable.”
Warren introduced legislation on Tuesday that would abolish Title IV of the Economic Growth, Regulatory Relief, and Consumer Protection Act and restore certain provisions used to overhaul the U.S. financial system in the aftermath of the 2008 recession. Those provisions were initially passed in 2010 through the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was later loosened by the Trump administration in 2018.
Warren’s legislation specifically targets a Title IV provision that raised the asset threshold to $250 billion for banks to be regulated as “systemically important.” That rollback, Warren argued, led to the deregulation and subsequent collapse of SVB and Signature Bank, prompting a national frenzy and strain on the national stock market.
“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. 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,” Warren said.
The bill has ignited some disagreement among Senate Democrats as the party members can’t agree on whether they want to repeal the 2018 legislation altogether or pass stronger regulations. Republicans, on the other hand, have rejected the idea.
Senate Minority Whip John Thune (R-SD) dismissed any talks of legislation as being “premature,” especially before lawmakers understand the causes behind the collapse.
“I think that most of our members first and foremost want to have the question … answered by the regulators: What happened?” Thune said at the GOP’s weekly press conference. “How come they were asleep at the switch and didn’t see this coming? And these are pretty obvious indicators. There’s still a lot of unrealized losses on the balance sheets of banks around the country and this clearly, there were circumstances around this.”
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Both SVB and Signature Bank collapsed late last week, prompting major federal intervention to backstop uninsured deposits in a bid to halt panic.
The collapse came after SVB announced on Wednesday it had sold $21 billion in bonds, cementing $1.8 billion in previously unrealized losses. That announcement sparked a frenzy among venture capital firms, which reportedly began advising clients to pull their money from Silicon Valley Bank — causing its stock to be thrust into a free fall.