Influential lobbying groups representing Silicon Valley Bank, the company whose abrupt collapse has sparked banking crisis fears, fought a proposal to increase payments into an insurance fund that the government is tapping into so it can safeguard customer deposits.
Federal regulators said on Sunday the government would make sure SVB depositors "have access to all of their money" and that any losses to the Deposit Insurance Fund, a group under the Federal Deposit Insurance Corporation insuring depositors, will be recovered by a special assessment on banks. Bank lobbying groups mobilized in 2022 against an FDIC proposal to increase insurance premiums for the fund, records show.
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"Shareholders and certain unsecured debt holders will not be protected," the Treasury Department, Federal Reserve, and the FDIC said in a joint statement. "Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law. Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors."
In the wake of the collapse, there has been a debate about what role the government should play. Back in August 2022, the Bank Policy Institute, the American Bankers Association, and the Mid-Size Bank Coalition of America, all of which represent SVB through trade group membership, pushed back on the FDIC's proposal to strengthen the fund.
"Numerous other enhancements to prudential standards have encouraged banks to strengthen their balance sheets and risk management," the groups wrote in a letter at the time to James P. Sheesley, the FDIC's assistant executive secretary. "The proposed increase would unduly burden banks and may harm the broader economy."
“Although we support the continued strength and resiliency of the DIF, such an aggressive assessment rate increase is unwarranted,” the groups said.
Nevertheless, the FDIC approved its proposal in October, according to a press release. When the groups sought to influence the FDIC, its insurance fund maintained under $126 billion and had a reserve ratio that was not in lockstep with federal law.
"It's certainly ironic that Silicon Valley Bank’s lobbying groups were trying to shortchange the Deposit Insurance Fund just as their deposits might need to call on it," Todd Phillips, a former attorney at the FDIC who is now the director of financial regulation and corporate governance at the Center for American Progress, a liberal think tank, told the Lever.
In 2022, SVB spent $200,000 lobbying on banking issues related to "innovation and technology," according to disclosures. Its CEO, Greg Becker, notably urged the Senate in 2015 to exempt SVB and other financial institutions from regulations approved on the heels of the 2008 financial crisis.
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The company was lobbying around the same time on issues related to the Systemic Risk Designation Improvement Act of 2015, a precursor to the Economic Growth, Regulatory Relief, and Consumer Protection Act, a 2017 bill signed by former President Donald Trump loosening bank regulations, disclosures show.
One supporter of the bill was Sen. Mark Warner (D-VA), whom Becker held a 2016 campaign fundraiser for in Menlo, California, according to a flyer. Warner, who sits on the Committee on Banking, Housing & Urban Affairs, received $21,600 between 2011 and 2022 from SVB's political action committee, Federal Election Commission filings show.
In addition to Warner, two lawmakers who pocketed campaign cash from the PAC during the 2022 elections included House Financial Services Committee Chairman Patrick McHenry (R-NC) and the committee's senior member, Rep. Gregory Meeks (D-NY). Rep. Tom Cole (R-OK) also received donations from the PAC.