Senate Democrats who voted to deregulate banks in 2018 say they have no regrets

The top row

Senate Democrats who voted in favor of the 2018 bank deregulation that the Biden administration blames for the banking crisis are standing by their decisions — representing a split within the party as other members seek to re-implement the law after Silicon Valley’s sharp attack Bank and Signature Bank. explosions.

Basic elements

Sens. Michael Bennet (D-Colo.), Angus King (I-Maine), Jeanne Shaheen (DN.H.) and Maggie Hassan (DN.H.) all told Politico They did not regret their decisions to vote with Republicans to approve rolling back regulations implemented as part of the Dodd-Frank Act passed in the wake of the 2008 banking crisis.

“I voted for a bill that was a bipartisan compromise,” Benet told Politico, while Shaheen blamed SVB’s collapse on “very poor management” that “you can’t fix with any regulation.”

The four senators were among 16 Democrats who voted with Republicans to pass the 2018 legislation, which exempted small and medium-sized banks like SVB and Signature from regular stress tests and liquidity and capital standards.

After the closure of SVB and Signature, other members of the party, including President Joe Biden, attributed the looser restrictions to bank failures, while Sen. Elizabeth Warren (D-Mass.) and Rep. Katie Porter (D-Calif.) ) introduced legislation on Tuesday that would renew 2010 regulatory requirements for smaller banks.

Some of the 31 Democratic senators who voted against the repeal in 2018 were not among the 17 supporters of the new legislation, including Sens. Chuck Schumer (NY), Sherrod Brown (Ohio), Kirsten Gillibrand (NY), Amy Klobuchar (Minn). .) and Patty Murray (Washington), although it is unlikely that those in senior leadership positions (such as Schumer, Brown and Murray) would publicly support the legislation in its infancy.

Chief critic

Senators who voted with Republicans in 2018 are facing criticism from their Democratic colleagues. Senate Majority Whip Dick Durbin (D-Ill.), who opposed the regulatory rollbacks, told Politico that “history” would determine the outcome of those members’ votes. “I was on his right side,” he said. Sen. Kyrsten Sinema (I-Ariz.)’s 2018 repeal vote has already become an issue in her potential re-election campaign in 2024. Rep. Ruben Gallego (D-Ariz.), who is running for her seat, called her vote the “most typical example of how we are different”. he tweetedaccusing her of siding with banking lobbyists who pushed for deregulation.

Key background

Silicon Valley Bank closed on Friday and handed over control of its assets to the Federal Deposit Insurance Corporation after expert testimony attributed to rising interest rates hitting the value of the banks’ investments in Treasury bonds and mortgage-backed securities. On Sunday, the FDIC shut down New York-based Signature Bank after it also saw a massive withdrawal of deposits in what was widely seen as a byproduct of SVB’s collapse, although Signature had struggled because of its heavy reliance on the troubled cryptocurrency industry. The FDIC is committed to making all SVB and Signature depositors whole, even if their deposits exceed the $250,000 limit for FDIC insurance.

Tangent line

The partial repeal of Dodd-Frank in 2018, which passed the House with the support of 33 Democrats, raised the threshold for banks to meet certain regulatory requirements from $50 billion in assets to $250 billion, leaving fewer than 10 financial US institutions are subject to the restrictions. signed into law by former President Barack Obama in 2010. If the law had been kept in place, both Silicon Valley and Signature Banks would have been covered by the old $50 billion cutoff.

What to watch out for

The bill that would eliminate the rollovers is unlikely to pass the GOP-controlled House, where Republicans widely oppose the new financial regulations. The legislation also faces tough odds in the Senate, where Democrats hold a two-seat majority but need support from nine Republicans to avoid impeachment. Brown, who chairs the Senate Banking Committee, expressed doubt it could pass. “We’re going to try,” he told Politico, adding, “I don’t know how we’re going to get a legislative fix.”

On the contrary

A clear Republican narrative about who should be blamed for the banking crises has yet to emerge. Those on the far right, including former Florida Gov. Ron DeSantis and Rep. Marjorie Taylor Greene (Ga.), have accused SVB of “woke” policies of diversity, equity and inclusion, along with its investments in environmental sustainability, although there is no evidence that the policies contributed to the bank’s collapse. Meanwhile, senior GOP members of Congress, including House Financial Services Committee Chairman Patrick McHenry and Sen. Mitt Romney (R-Utah), applauded the FDIC’s intervention in banking crises, while the House Select Committee’s representative Rep. Kevin Hearn (R-Okla.) reportedly “discourages creating a narrative that is not accurate or justified” on a members-only call Monday, GOP sources said multiple stores. However, the links between the federal government’s debt and spending could become a target for the GOP. McCarthy addressed this in an interview with Fox News on Sunday, telling host Maria Bartiromo, “high debt brings inflation, and what happens to inflation? You see with this bank—interest rates are going up.”

Further reading

Hard-Right Republicans—DeSantis, Greene, Hawley—Blame SBV’s Failure on ‘Woke’ Policies Without Clear Evidence (Forbes)

Democrats Blame SVB Collapse on Trump-Era Regulatory Upheavals—But GOP Opposes Tougher Rules (Forbes)

Warren unveils bill to reverse Trump-era bank deregulation after SVB collapse (Forbes)

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