BeaverFever Posted March 14 Report Share Posted March 14 (edited) Trump-era banking law paved way for Silicon Valley Bank’s collapse Nicole NareaMar 13, 2023, 7:05pm EDT Silicon Valley Bank was a test case for Congress’s 2018 bipartisan banking deregulation law. It failed. By Nicole Narea@nicolenarea Mar 13, 2023, 7:05pm EDT 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. 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.” SVB lobbied for deregulation — and may have brought about its own demise In a statement to a Senate committee in 2015, SVB CEO Greg Becker specifically advocated for raising the $50 billion threshold and argued that failing to do so would saddle mid-sized banks like his with “significant burdens that inherently and unnecessarily will reduce our ability to provide the banking services our clients need.” He argued that the compliance costs and human resources associated with having to meet the regulatory requirements would have forced the bank to “divert resources and attention from making loans to small and growing businesses that are the job creation engines of our country, even though our risk profile would not change.” He also touted SVB’s “deep understanding of the market it serves,” “strong risk management practices,” and the “fundamental strength of the innovation economy” on which SVB relied, as well as the bank’s ability to lend to almost 8,000 clients while maintaining strong credit. The bank spent half a million dollars on lobbying in the leadup to the law’s passage, including on hiring two former senior staffers for now House Speaker Kevin McCarthy. It continued to lobby the FDIC even after the law was passed. The Dodd-Frank regulations that SVB fought against might have helped identify the bank’s pitfalls earlier. Because the bank catered to Silicon Valley startups and investors with deposits that generally exceeded the $250,000 FDIC deposit insurance limit, 97 percent of its deposits were uninsured — an abnormally large share compared to other consumer banks. That left the bank vulnerable to instability in the tech sector, which has seen more than 120,000 layoffs in 2023 alone. https://www.vox.com/business-and-finance/2023/3/13/23638655/silicon-valley-bank-trump-fdic-banking-law Edited March 14 by BeaverFever 1 Quote Link to comment Share on other sites More sharing options...
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