Progressive lawmakers are blaming the collapse of two U.S. banks over the weekend on a 2018 bill that rolled back regulations put in place after the 2008 financial crisis.
Federal regulators shut down Silicon Valley Bank on Friday, two days after the nation's 16th-largest federally insured bank announced that it needed to raise more than $2.2 billion to remain solvent, which sent its stock price plunging over 60% in 48 hours. On Sunday evening, they also announced the closure of Signature Bank while revealing plans to make customers of both financial institutions whole. The Silicon Valley Bank failure is the second-largest in U.S. banking history while Signature Bank is the third.
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"No one should be mistaken about what unfolded over the past few days in the U.S. banking system: These recent bank failures are the direct result of leaders in Washington weakening the financial rules," Sen. Elizabeth Warren (D-MA) wrote in a New York Times op-ed published Monday.
Warren pointed out how SVB was one of multiple banks that lobbied Congress and then-President Donald Trump to weaken the Dodd-Frank Act, which established banking rules to prevent another financial meltdown. The regulations were pared back with the support of both parties in 2018.
"Had Congress and the Federal Reserve not rolled back the stricter oversight, SVB and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks. They would have been required to conduct regular stress tests to expose their vulnerabilities and shore up their businesses," she wrote. "But because those requirements were repealed, when an old-fashioned bank run hit S.V.B., the bank couldn’t withstand the pressure — and Signature’s collapse was close behind."
Sen. Bernie Sanders (I-VT) also blamed the Trump-era law for the collapse of SVB, saying in a Sunday statement: "Let’s be clear. The failure of Silicon Valley Bank is a direct result of an absurd 2018 bank deregulation bill signed by Donald Trump that I strongly opposed."
The Vermont senator then quoted a 2018 Congressional Budget Office report predicting that the bill would "increase the likelihood that a large financial firm with assets of between $100 billion and $250 billion would fail."
"Unfortunately, that is precisely what happened," Sanders said.
Rep. Alexandria Ocasio-Cortez (D-NY) echoed Sanders's and Warren's sentiments, tweeting Saturday: "The regulators were there until SVB lobbied Congress to remove the guardrails that prevent this kind of crisis in the first place. Warnings were everywhere. SVB, like many gamblers before them, knew what they were doing. Let the FDIC open the books & see what it’s working with."
"How many of the Silicon Valley folks who lobbied Congress + Trump to cause this crisis are willing to admit they were wrong? I haven’t seen a single one of these guys crying for a bailout take a single ounce of accountability for their actions. It’s honestly shameless," she wrote.
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Pressed about bailing out SVB on Sunday, Treasury Secretary Janet Yellen said federal regulators were focused on making customers whole.
"Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and we’re certainly not looking. And the reforms that have been put in place means that we’re not going to do that again," Yellen said.