The recent collapse of the Silicon Valley Bank and Signature Bank, two of the nation’s largest banks, has sent shockwaves through the economy and has prompted Senator Elizabeth Warren (D-MA) to introduce a bill to repeal the Trump-era rollback of the Dodd-Frank Act.[0] The bill, which has been co-sponsored by Rep. Katie Porter (D-CA), would put banks with at least $50 billion in assets back under Federal Reserve oversight and make them subject to Dodd-Frank Act stress tests.
The banks’ downfall has been attributed to their focus on the struggling technology startup industry and increasing interest rates that caused a decline in the value of SVB’s investments, billions of which were in mortgage-backed securities. The FDIC has taken control of the possessions held by both banks and guaranteed that all depositors will be able to access their funds by Monday.[1]
Senator Warren claims that the bank’s failure was due to its acceptance of crypto customers without having sufficient safeguards.[2] She also noted that the 2018 law weakened aspects of the 2010 Dodd-Frank law that passed after the 2008 financial crisis, specifically, enhanced liquidity requirements that ensured that banks had enough money to meet their obligations in times of stress; requirements for banks to hold a certain amount of capital so they could absorb losses; and that they had regular resolution plans to help financial regulators safely wind banks down in times of crisis.[3]
The Biden government has attempted to reassure the public that the banking system is secure despite the turmoil that has spread throughout the financial sector.[4] The president has called for Congress and regulators to strengthen the rules for banks, and Senator Warren has proposed legislation to do just that by repealing the core of Trump’s bank law.
The legislator stated that Signature Bank had assisted in attempts to reduce the capital demands laid out in the Dodd-Frank Wall Street reform law, according to the publication, and also noted that the bank had donated a considerable amount of money to the campaigns of those in Congress who were trying to ease bank regulations.[5] Warren has called for an explanation from the CEO of Signature Bank regarding “the economically disastrous outcomes you created” and has stressed that “Congress and the public must learn the lessons from the failure of Signature Bank.
0. “Dems Introduce Bill to Reinstate Dodd-Frank Regulations After Twin Bank Failures” Democracy Now!, 15 Mar. 2023, https://www.democracynow.org/2023/3/15/headlines/dems_introduce_bill_to_reinstate_dodd_frank_regulations_after_twin_bank_failures
1. “Powell Should Recuse Himself From Fed’s Internal Review Of SVB Oversight, Elizabeth Warren Says” Forbes, 14 Mar. 2023, https://www.forbes.com/sites/saradorn/2023/03/14/powell-should-recuse-himself-from-feds-internal-review-of-svb-oversight-elizabeth-warren-says/
2. “US Senator: Signature Bank Collapsed Because It Embraced Crypto Customers Without Sufficient Safeguards …” Bitcoin News, 17 Mar. 2023, https://news.bitcoin.com/us-senator-signature-bank-collapsed-because-it-embraced-crypto-customers-without-sufficient-safeguards/
3. “Elizabeth Warren says Republicans handed Fed chairman ‘flamethrower that he aimed at the banking rules’” The Independent, 16 Mar. 2023, https://www.independent.co.uk/news/world/americas/us-politics/elizabeth-warren-federal-reserve-silicon-valley-bank-b2302481.html
4. “After Silicon Valley Bank collapses, plenty of worries over what’s next” NPR, 14 Mar. 2023, https://www.npr.org/2023/03/14/1163135286/silicon-valley-bank-collapse-fallout-whats-next
5. “Elizabeth Warren in letter to Signature Bank seeks answers for ‘disastrous’ collapse” Yahoo News, 16 Mar. 2023, https://news.yahoo.com/elizabeth-warren-in-letter-to-signature-bank-seeks-answers-for-disastrous-collapse-110000202.html