Following the last banking collapse in 2008, caused by the banksters of Wall Street and their subprime mortgages fraud scheme, Congress enacted the bare minimum of new banking regulations in Dodd-Frank to prevent the so-called “too big to fail” banks from engaging in this kind of risky speculative investments again.
Republicans were largely opposed to Dodd-Frank, and when they took control of Congress again in 2017 with Donald Trump in the White House, they rewarded their banksters of Wall Street campaign donors by rolling back provisions of Dodd-Frank. It was once again the Wild West.
Some banking experts on Friday pointed out that a bank as large as Silicon Valley Bank might have managed its interest rate risks better had parts of the Dodd-Frank financial-regulatory package, put in place after the 2008 crisis, not been rolled back under President Trump.
In 2018, Mr. Trump signed a bill that lessened regulatory scrutiny for many regional banks. Silicon Valley Bank’s chief executive, Greg Becker, was a strong supporter of the change, which reduced how frequently banks with assets between $100 billion and $250 billion had to submit to stress tests by the Fed.
The failure of Silicon Valley Bank is the biggest in the U.S. since Washington Mutual in 2008, and was not the last.
On Friday, Signature Bank customers panicked by the sudden collapse of Silicon Valley Bank withdrew more than $10 billion in deposits in a bank run. Why regulators seized Signature Bank in third-biggest bank failure in U.S. history:
That run on deposits quickly led to the third-largest bank failure in U.S. history. Regulators announced late Sunday that Signature was being taken over to protect its depositors and the stability of the U.S. financial system.
The sudden move shocked executives of Signature Bank, a New York-based institution with deep ties to the real estate and legal industries, said board member and former U.S. Rep. Barney Frank. Signature had 40 branches, assets of $110.36 billion and deposits of $88.59 billion at the end of 2022, according to a regulatory filing.
“We had no indication of problems until we got a deposit run late Friday, which was purely contagion from SVB,” Frank told CNBC in a phone interview.
Problems for U.S. banks with exposure to the frothiest asset classes of the Covid pandemic — crypto and tech startups — boiled over last week with the wind down of crypto-centric Silvergate Bank. While that firm’s demise had been long expected, it helped ignite a panic about banks with high levels of uninsured deposits. Venture capital investors and founders drained their Silicon Valley Bank accounts Thursday, leading to its seizure by midday Friday.
That led to pressure on Signature, First Republic and other names late last week on fears that uninsured deposits could be locked up or lose value, either of which could be fatal to startups.
Business Insider reports, Bernie Sanders says Silicon Valley Bank’s failure is the ‘direct result’ of a Trump-era bank regulation policy:
Sen. Bernie Sanders has blamed a Trump-era banking law for the Silicon Valley Bank’s failure.
“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,” Sanders wrote in a statement on Sunday.
Sanders was referring to the Economic Growth, Regulatory Relief, and Consumer Protection Act, which former President Donald Trump signed into law in May 2018.
The bill was seen as a significant rollback of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. At the bill signing, Trump commented on the previous banking reforms, saying “they were in such trouble. One size fits all — those rules just don’t work,” per The Washington Post.
Trump also said at the time that the Dodd-Frank regulations were “crushing community banks and credit unions nationwide.”
Signing the bill into law meant that Trump was exempting smaller banks from stringent regulations and loosening rules that big banks had to follow. The law raised the asset threshold for “systematically important financial institutions” from $50 billion to $250 billion.
This meant that the Silicon Valley Bank — which ended 2022 with about $209 billion in assets — was no longer designated as a systematically important financial institution. As such, it was not subject to the tighter regulations that apply to bigger banks.
Sanders wrote in his Sunday statement that the Trump administration had disregarded all the lessons it should have learned from the 2008 Wall Street crash and the Enron scandal.
“Now is not the time for US taxpayers to bail out Silicon Valley Bank. If there is a bailout of Silicon Valley Bank, it must be 100 percent financed by Wall Street and large financial institutions,” he wrote.
Sanders added that the US “cannot continue down the road of more socialism for the rich and rugged individualism for everyone else.”
“Let us have the courage to stand up to Wall Street, repeal the disastrous 2018 bank deregulation law, break up too big to fail banks, and address the needs of working families, not the risky bets of vulture capitalists,” Sanders wrote.
And what do we hear today from the Republicans who helped enact the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018? These accomplices to the banksters of Wall Street want to blame the bank panic on “wokeness” – WTF? Far-right falsely blame diversity as reason Silicon Valley Bank collapsed:
Florida’s Republican Governor Ron DeSantis is leading the charge against “wokeness” and diversity, this time falsely blaming “DEI” – diversity, equity, and inclusion – as the reason Silicon Valley Bank collapsed on Friday.
“I mean, this bank, they’re so concerned with DEI and politics and all kinds of stuff. I think that really diverted from them focusing on their core mission,” DeSantis told Fox Corp.’s Maria Bartiromo on Sunday, as Florida Politics reports.
“I also look at it and say we have such a morass of federal regulations. We have a massive federal bureaucracy and yet they never seem to be able to be there when we, we need them to be able to prevent something like this,” DeSantis said.
Ron DeSantis is a complete moron. It was GQP deregulation of the banks that made this possible, not regulation.
Donald Trump, as President, stripped away the very regulations that could have stopped Silicon Valley Bank from collapsing. Just hours after DeSantis made his remarks, Treasury Secretary Janet Yellen announced all SVB depositors would be able to access all their funds on Monday, even over and above the FDIC guarantee limit of $250,000, and promised Wall Street, not U.S. taxpayers, would foot the bill.
[Coup Plotter co-conspirator] U.S. Senator Mike Lee (R-UT), posting screenshots from SVB’s website, mocking the bank’s diversity policies along with its environmental, social, and corporate governance polices.
“Well, ESG and DEI certainly didn’t save SVP,” he declared.
[As] Florida Politics noted, “a more proximate reason for the bank run that led to FDIC receivership could be its heavy investment in 10-year bonds with low-interest rates combined with the need for liquidity from its high-dollar account venture capital clients. When interest rates surged recently, SVB found itself in a cash crush, made worse by an earlier meltdown in the tech sector, causing many capital investors to scale back.”
Republican House Oversight Chairman Jim Comer wrongly blamed SVB’s “woke” policies for its downfall.
Comer, as Mediaite noted, told Bartiromo on Sunday, “we see now coming out they were one of the most woke banks in their quest for the ESG-type policy and investing. This could be a trend and there are consequences for bad Democrat policy.”
This MAGA Fascist is one serious POS.
The former Moron-in-Chief who signed the Economic Growth, Regulatory Relief, and Consumer Protection Act (2018), is his usual totally insane self. CNBC reports:
Trump, who is widely considered the frontrunner among the early field of official and likely candidates, took the opportunity to lash out at President Joe Biden, while offering no specifics about how he would handle the situation differently.
In a Truth Social post on Saturday, Trump issued an all-caps prediction that “WE WILL HAVE A GREAT DEPRESSION FAR BIGGER AND MORE POWERFUL THAN THAT OF 1929. AS PROOF, THE BANKS ARE ALREADY STARTING TO COLLAPSE!!!”
That claim came as Trump’s spokesman asserted in a statement to Fox News that “Biden has presided over a catastrophic economy that has devastated everyday Americans and has caused misery across the country due to his anti-America policies.”
Insane Republicans like these are yet another reason why Republicans should never be in charge of the government ever again. In addition to being anti-democracy seditious insurrectionist MAGA Fascists.
Paul Krugman writes, “Silicon Valley Bank Isn’t Lehman”, https://www.nytimes.com/2023/03/13/opinion/silicon-valley-bank-lehman-bailout.html
If there is one thing almost all observers of the economic scene have agreed about, it is that the issues facing the U.S. economy in 2023 are very different from those it faced in its last crisis, in 2008.
Back then we were dealing with collapsing banks and plunging demand; these days banking has been a back-burner issue and the big problem has seemed to be inflation, driven by too much demand relative to the available supply.
Oh, there were some echoes of past follies, because there always are. Hype springs eternal; the crypto cult shares some obvious features with the rise and fall of subprime mortgages, with people lured into complex financial arrangements they don’t understand. But nobody expected a repeat of those frightening weeks when the bottom seemed to be falling out of the world financial system.
[B]ut S.V.B. isn’t Lehman, and 2023 isn’t 2008. We probably aren’t looking at a systemic financial crisis. And while the government has stepped in to stabilize the situation, taxpayers probably won’t be on the hook for large sums of money.
[E]ven if the government had done nothing, the fall of S.V.B. probably wouldn’t have had huge economic repercussions. In 2008 there were fire sales of whole asset classes, especially mortgage-backed securities; since S.V.B.’s investments were so boring, similar fallout would be unlikely. The main damage would come from disruption of business as firms found themselves unable to get at their cash, which would be worse if S.V.B.’s fall led to runs on other medium-size banks.
[I]t’s important to note that this doesn’t mean bailing out stockholders: S.V.B. has been seized by the government, and its equity has been wiped out. It does mean saving some businesses from the consequences of their own foolishness in putting so much money in a single bank, which is infuriating — especially because so many tech types were vocal libertarians until they themselves needed a bailout.
Indeed, probably none of this would have happened if S.V.B. and others in the industry hadn’t successfully lobbied the Trump administration and Congress for a relaxation of bank regulations, a move rightly condemned at the time by Lael Brainard, who has just become the Biden administration’s top economist.
The good news is that taxpayers probably won’t be on the hook for much if any money. It’s not at all clear that S.V.B. was actually insolvent; what it couldn’t do was raise enough cash to deal with a sudden exodus of depositors. Once things have stabilized, its assets will probably be worth enough, or almost enough, to pay off depositors without an infusion of additional funds.
And then we’ll be able to return to our regularly scheduled crisis programming.
Jason Easley writes, “Rachel Maddow Shouts Out Kyrsten Sinema For Voting To Weaken Banking Rules”, https://www.politicususa.com/2023/03/13/rachel-maddow-shouts-out-kyrsten-sinema-for-voting-to-weaken-banking-rules.html
Rachel Maddow dove into the political story of how Dodd-Frank was weakened, and she gave a shout-out to Kyrsten Sinema for voting with Republicans to set the stage for more bank collapses.
Maddow explained the 2018 vote to weaken Dodd-Frank:
If there is a bad policy out there that is certain to help big business while possibly placing consumers in jeopardy; the odds are good that Sen. Kyrsten Sinema will be somewhere nearby.
Republicans want to act like the weakening of the Dodd-Frank regulations was something both parties broadly supported. It wasn’t. Trump and the GOP’s deregulation of banks was voted for by Democrats like Sinema and other conservative Democrats who were worried about keeping their seats.
Rachel Maddow gave everyone a solid reminder of the priorities and decision-making that illustrate why Krysten Sinema doesn’t belong in the US Senate.
Steve Benen: “The more Republicans whine incoherently about “woke” banks, the more we’re reminded how unprepared they are to take policymaking seriously.” “Why Republicans’ fixation on ‘woke’ banking is so unsettling”, https://www.msnbc.com/rachel-maddow-show/maddowblog/republicans-fixation-woke-banking-unsettling-rcna74820
Vox.com reports, “A 2018 banking law paved the way for Silicon Valley Bank’s collapse”, https://www.vox.com/business-and-finance/2023/3/13/23638655/silicon-valley-bank-trump-fdic-banking-law
The collapse of Silicon Valley Bank and other similarly sized banks in recent days has put a spotlight on Congress’s 2018 bipartisan banking deregulation law, which was signed by then-President Donald Trump.
We’ll never know what might have happened if the law hadn’t been enacted. But given that Silicon Valley Bank would have been subject to stricter oversight under the old rules, more regulation may have slowed — or even prevented — the panic that set in last week as depositors rushed to withdraw their funds.
In the wake of the bank’s implosion, some Democrats and economists have begun to argue that the bank’s failure and subsequent concerns about contagion in the financial sector actually are direct results of that law, which rolled back key parts of the 2010 Dodd-Frank Act aimed at preventing banks from making the kinds of big bets that led to the 2008 financial crisis.
In an op-ed in the New York Times [https://www.nytimes.com/2023/03/13/opinion/elizabeth-warren-silicon-valley-bank.html] Monday, Sen. Elizabeth Warren (D-MA), who led the charge against deregulation in 2018, wrote that SVB and the crypto-focused Signature Bank, which was also shut down by the FDIC on Sunday, couldn’t shoulder the old-fashioned bank runs that killed them precisely because there wasn’t oversight to “expose their vulnerabilities and shore up their businesses.”
Notably, the 2018 law changed which banks are considered “systemically important” to regulators. It increased the threshold from institutions holding at least $50 billion in assets to those with $250 billion. That means only the largest banks face stricter regulation, including requirements to maintain certain levels of liquidity and capacity to absorb losses; comply with company- and government-run stress testing; and submit a living will to prepare for potential failure.
SVB had $209 billion in assets, making it the 16th-largest bank in the US by the time it was taken over by the Federal Deposit Insurance Corporation (FDIC) on Friday. But it still wasn’t big enough to be subject to the strictest standard of scrutiny under the 2018 law.
Sen. Bernie Sanders (I-VT) noted in a statement Sunday that the Republican director of the Congressional Budget Office warned of this exact scenario five years ago — that the bill would increase what he thought was a small “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.
[T]he bank also failed to hedge against the risk posed by rising interest rates as it bet on long-term Treasury bonds during the pandemic. Those bonds proved to be a ruinous investment when the bank suddenly needed to free up more liquidity quickly. It didn’t even have an official chief risk officer in the months before the FDIC takeover, as would have been required prior to the 2018 deregulation, even though the bank paid out bonuses within hours of its collapse.
It’s not clear that more oversight would have foreseen those problems and mitigated SVB’s risk exposure. But it probably wouldn’t have hurt.
Peter Thiel helped cause the problem when he and other billionaires started a bank run. Thiel and others pulled millions from SVB last week before the government takeover because they knew there was trouble.
Rich folks warning other rich folks before they screw over the US taxpayer. Corruption.
SVB paid bonuses just hours before the government takeover. Corruption.
SVB was being run like a venture capital fund, not like a bank, and that was set up by the folks on Sand Hill Road.
Want VC money, you need to use SVB.
Those Sand Hill Billionaires took time from pleasuring themselves to their Ayn Rand swimsuit calendars and spent the weekend screaming on Twitter that if Yellen and Biden didn’t a bail them out the world would end.
And of course they say this isn’t a bailout because they’re lying sacks of dogshit.
Rich people are being stealing your money and they’ll make up all kinds of stories to keep you and I from lighting up some torches and getting out the pitchforks.
The government owns the bank now, it’s a bailout.
We never fixed the US banking system after 2008, instead we let banks like Wells Fargo go on years long crime sprees, golden parachutes but never jail time, and nothing will change after this.
Dems will not do what’s needed because 2024 is an election year and they need Silicon Valley billionaire money.
Those same billionaires are now saying it’s not just SVB that needs a bailout, more bailouts are coming.
If Silicon Valley and the US banking system fell into a sinkhole tomorrow the world would wake up a better place on Wednesday.
TIL that Barney Frank was one of the folks pushing to loosen regulations on these banks back in 2018, because he’s on the board of one.
One half of Dodd-Frank FFS.
Barney always come off as holier than thou, but I thought he backed it up for the most part.
There’s a reason I’m jaded.