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Democrats defend deregulation vote amid banking blame game

Democrats on Capitol Hill defend voting on the 2018 bank deregulation bill that President Biden and others blame for last week’s shocking failures of Silicon Valley Bank and Signature Bank .

The 49 Democrats — 33 in the House and 16 in the Senate — plus Democratic caucus participant Sen. passed.

Of those, 19 are still in the House, all of whom must face voters next year, and 12 are in the Senate, five of whom will be re-elected in 2024. As a Democrat in 2018, he voted in favor of a deregulation bill in the House and is seeking re-election next year.

Backers of the bill, signed into law by former President Trump, will offer relief to small and medium-sized banks that were struggling with the tight regulation introduced under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Was looking at this bill as a way to serve. It was enacted after the 2008 financial crisis.

But many Democrats are now blaming that setback for the failure of Silicon Valley and Signature banks, which were exempted from regulation in 2018.

Senator Debbie Stabenow of Michigan, a member of the Democratic leadership who is retiring next year, told The Hill when asked if she regretted voting on the bill.

“It was very important to me to give some flexibility to the small banks, regional banks and credit unions that didn’t cause the financial crisis in 2008.

Rep. Josh Gottheimer (DN.J.) also said he did not regret voting in favor of Rollback, saying the Dodd-Frank Act was “impossible” for small and medium-sized and regional banks. rice field.

“You had a set of rules that literally applied not only to a handful of the largest financial institutions in the country, but also to small and medium-sized regional banks. It had been sold to a large bank, and there were no community banks left in the country.

The 2018 bill, formally known as the Economic Growth, Deregulation and Consumer Protection Act, removes some banks from the more stringent Federal Reserve oversight and stress tests required under the Dodd-Frank Act. exemption and increased the asset threshold for these regulations from $50 billion to $250 billion. .

Silicon Valley Bank and Signature Bank both fell within that range.

“Let’s be clear: The failure of the Silicon Valley Bank was a direct result of the ridiculous bank deregulation bill of 2018 signed by Donald Trump, which I strongly opposed,” said Senator Bernie Sanders (I -Vt.) wrote in the statement.

Senator Elizabeth Warren (D-Massachusetts), who voted against the 2018 bill, is now leading an effort to repeal the bill. Unless Congress and the Federal Reserve return to stricter oversight.”

“Periodical stress testing would have been necessary to expose vulnerabilities and strengthen the business,” she says. wrote in the New York Times op-ed“But when an old-fashioned bank run hit the SVB as these requirements were abolished, the banks could not withstand the pressure and the signature collapse was just behind them.

California-based Silicon Valley Bank, which primarily serves startups, was acquired by federal regulators last Friday after a major crackdown on the bank over liquidity issues. . A few days later, state regulation seized a New York-based undersigned bank that did business primarily with real estate firms and law firms, and was inundated with withdrawals of deposits by customers.

The Signature Valley bank failure is now the second-largest bank failure in American history, and the Signature bank failure is the third-largest.

Sen. Tim Kaine (D-Va.), who backed the vote on the 2018 deregulation bill, told The Hill that Old Dominion would be out of business from 2010 to 2018 as smaller banks faced a situation where they had to hire a compliance department. He said he lost part of the bank during the year. , decided to sell to a larger institution, resulting in the closure of branches and dismissal of employees.

“My community bank solved this problem when it spent several years implementing it. We are accelerating too fast to be successful in this field.”

“Community Bank [2018] The Bank Bill is done, they are, we strongly support this. I am,” he added.

Senator Gary Peters (D-Michigan) also said he did not regret voting in 2018 for the deregulation bill and cautioned against jumping to conclusions about the causes of the collapse.

“I don’t know all the facts,” Peters said. “There is an investigation going on right now. The federal government is going to find out exactly what happened.

The Justice Department and Securities and Exchange Commission are investigating the failure of Silicon Valley banks, and the Federal Reserve has launched its own investigation. The central bank said a review of the investigation, led by Deputy Supervisory Chairman Michael Burr, will be published on May 1.

Sen. Chris Koons (D-D), who voted in favor of the 2018 bill, said it was “premature” to tie the five-year-old bill to last week’s collapse.

“I think it is too early to say that we know that this action by regulators under the previous administration, or this action by legislation under the previous administration, made a difference,” he said. “We don’t know that,” he told The Hill.

Senators cited other factors that may have led to the bank’s collapse, including management failures, inflation risk planning failures and regulatory oversight failures.

But Warren and Rep. Katie Porter (California Democrat) draw a direct line between struggling banks and the 2018 bill. The progressive pair, along with dozens of other Democrats, on Tuesday introduced legislation to abolish the 2018 Dodd-Frank rollback by returning the regulatory threshold to $50 billion. .

The law calls for Biden this week to ask Congress and banking regulators to “strengthen banking rules to reduce the likelihood of another bank failure of this kind and to protect America’s jobs and small businesses.” was done later.

Stabenow said he was concerned about thresholds under the Warren-Porter bill.

“The reason I originally supported the bill was because I felt the $50 billion threshold was too low. .

“And I think we need to look at what really happened here. is what I am interested in.

Koons said it was “premature” to consider “concrete solutions” if the cause of the bank failure remained unclear, and Kane said he would not take any action on Warren’s bill before making a decision. , he said he wanted to review Barr’s analysis first.

But if Burr says that rolling back is a good thing, Kane said he “tends to be likable.”

One of Warren’s bill supporters could be Rep. Andre Carson (D., Indiana), who backed the 2018 rollback. Asked about his vote, the lawmaker told The Hill in a statement that it was time to move the standards back in the direction of Dodd Frank in light of the bank’s closure.

“In light of recent events, I believe it is time to review and update these changes to bring the requirements closer to the original Dodd-Frank standards. “This will strengthen our financial system so that it remains resilient and reliable during the ebb and flow of the economy.”

Copyright 2023 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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