A group of Democrats led by Sen. Elizabeth Warren of Massachusetts and Rep. Katie Porter of California will unveil legislation on Tuesday to restore banking regulations undone under President Donald Trump in 2018, in an effort to fix what they say is the cause. From the collapse of the Silicon Valley bank.
the legislationfirst reported by NBC News, would undo the pivot of a bipartisan law passed by the Republican-led Congress in 2018 that eased Dodd-Frank financial regulations for midsize banks by raising the “too big to fail” threshold. From $50 billion in assets to $250 billion.
“In 2018, I sounded the alarm about what would happen if Congress backtracked on important Dodd-Frank protections: Banks would take risks to increase their profits and collapse, threatening our entire economy — and that is exactly what happened,” Warren said. “President Biden has called on Congress to strengthen the rules on banking, and I am proposing legislation to do just that by scrapping the core of the Trump Banking Act.”
The Warren-Porter bill would restore the threshold set in 2010 for enhanced capital requirements and stress tests in an effort to prevent future failures like those that occurred at SVB and Signature Bank last week.
The legislation will be formally introduced with a group of original sponsors, according to Warren’s office — including Sens. Tammy Baldwin, D-Wisconsin, and Bob Casey, D-Pennsylvania, both of whom face re-election in competitive states in 2024; Plus Rep. Pramila Jayapal, D-Washington, chair of the Progressive caucus, and Rep. Ro Khanna, D-Calif., who represents SVB County; and Sen. John Fetterman, D-Pennsylvania, who serves with Warren on the Senate Banking Committee.
Porter, who is running for the Senate seat held by Sen. Dianne Feinstein in a tight race against several leading House Democrats, said the bill would “restore the commonsense protections that keep corporate greed in check and restore confidence in our financial system.”
Another member of the bill’s sponsors is Rep. Ruben Gallego, D-Arizona, who is running for the Senate seat held by Sen. Kirsten Sinema, I-Ariz.; Sinema voted in favor of the 2018 legislation while she was a member of the House of Representatives, while Gallego opposed it.
The new bill is likely to reignite divisions among Democrats dating back to the 2018 battle. At the time, Warren pressured senators to block the GOP-led deregulation bill, but 17 Democrats voted with the Republicans, giving them enough support. to break the hold and pass it on. Supporters have argued that many small and medium-sized banks are being stifled by the reinforced regulations passed in the aftermath of the 2008 financial crisis and could do better without it.
Among the banks affected by the loosening of regulations in the Trump-era measure is Silicon Valley Bank, which joined a group of midsize and community banks pushing for such relaxation at the time. Warren-Porter’s bill wouldn’t repeal the entire 2018 law, but rather its core — Title IV, called “Regulations for Certain Bank Holding Companies” — that sets limits on the assets that banks are subject to federal scrutiny.
Some Democratic supporters of the 2018 law, including Sen. Mark Warner of Virginia, say it placed appropriate levels of regulation on mid-size and community banks.
Sen. Jeanne Shaheen, D-, who voted for the 2018 bill, said Tuesday she stands by her vote.
“I think it’s early. We need to complete the investigation of what really happened at Silicon Valley Bank. Not all regulations in the world will fix bad management practices, and that seems to be one of the problems with SVB,” Shaheen said. “But depending on the outcome, I think it’s appropriate We have to take a look at what we did and see if it’s still there.”
The failure of the SVB reopened the debate on financial regulation. It is not clear that a bill led by Warren could gain the 60 votes needed to advance in the Senate. And if that happens, it would be a tougher sell in the House of Representatives, which is controlled by Republicans who voted for the deregulation measure in 2018.
Republicans don’t blame the bank’s failure on a lack of regulation: House Speaker Kevin McCarthy of California chirp On Tuesday, President Joe Biden’s spending caused “record inflation and a rapid rise in interest rates that smashed household balance sheets and banks as well.”
“Hipster-friendly troublemaker. Communicator. Organizer. Devoted web lover. Unapologetic problem solver. Reader. Explorer. Travel guru.”
S&P 500: Crashing Bank Stock, Dow Giant Lead Losers
First Republic stock fell after S&P downgraded its credit rating again
Central banks announce dollar liquidity measures to ease the banking crisis