Learning from Signature Bank’s Failure: Senator Warren Calls for Reinstatement of Dodd-Frank Act

On March 13, 2023, Silicon Valley Bank, the 16th largest bank in the U.S., and Signature Bank, a main lender to the struggling cryptocurrency industry, both collapsed.[0] This marked the largest bank failure since 2008, and the Federal Deposit Insurance Corporation (FDIC) has taken over their assets, promising all depositors that they will have access to their money by Monday.[1]

In response to these collapses, Senator Elizabeth Warren (D-MA) and Representative Katie Porter (D-CA) have introduced legislation to repeal the 2018 rollback of the Dodd-Frank Act, a law passed in the aftermath of the Great Recession to prevent excessive risk-taking by banks.[2] The bill would bring the threshold for banks that must undergo extra federal regulations back down to at least $50 billion in assets, which was raised to $250 billion after lobbying by the banking industry.[3]

Warren has also noted that Signature Bank’s failure was due to its “get-rich-quick” narrative and its “embrace crypto customers with insufficient safeguards.”[4] She has demanded answers from the CEO of Signature Bank regarding the “economically disastrous outcomes” the bank caused.

Section 165 of the Dodd-Frank Act implemented “enhanced prudential regulation” rules for banks with more than $50 billion in assets, labeling them as “too big to fail.”[0] However, in 2018, Congress, with the support of the Trump administration, passed the Economic Growth, Regulatory Relief and Consumer Protection Act, which amended the Dodd-Frank Act and raised the threshold up to $250 billion.[0] Silicon Valley Bank’s CEO, Greg Becker, argued that the restrictions on midsize banks under the Dodd-Frank Act were too burdensome and inhibited banks’ ability to provide the necessary banking services to clients.[5]

Now, Senator Warren is calling for Congress to learn from the failure of Signature Bank, as well as for banks to adhere to the key provisions of the Dodd-Frank Act in order to prevent similar financial catastrophes from occurring in the future.

0. “The collapse of major US banks leads to bills calling for more regulation” Houston Chronicle , 17 Mar. 2023, https://www.houstonchronicle.com/news/article/the-collapse-of-major-us-banks-leads-to-bills-17846154.php

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. “Warren, Porter unveil bill to undo Trump-era Dodd-Frank rollback after Silicon Valley Bank collapse” The Hill, 15 Mar. 2023, https://thehill.com/business/3900920-warren-porter-unveil-bill-to-undo-trump-era-dodd-frank-rollback-after-silicon-valley-bank-collapse/

3. “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

4. “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

5. “Elizabeth Warren is among the furious politicians demanding SVB execs return their salaries, bonuses, and $84 million in stock sale profits” Yahoo Life, 14 Mar. 2023, https://www.yahoo.com/lifestyle/elizabeth-warren-among-furious-politicians-202131829.html

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