At least two of the banks that collapsed over the weekend had previously been two of the biggest advocates for easing regulatory rules on the banking industry.
According to The Hill, both Silicon Valley Bank (SVB) and the New York-based Signature Bank had lobbied for a 2018 bill called the Economic Growth, Regulatory Relief, and Consumer Protection Act, which ultimately became law. The law made the banks and other banks of their size and caliber exempt from stringent stress testing and capital requirements that had previously been implemented in the 2010 Dodd-Frank Act.
The bill had passed through Congress with bipartisan support and was signed into law by President Donald Trump. It dictated that banks worth $250 billion or less in assets were not “systemically important,” and thus made them immune from strict oversight reviews conducted by the Federal Reserve.
Both SVB and Signature Bank’s lobbyists insisted that neither of them were a systemic risk to the nation’s economy or the banking industry. However, upon the collapse of both banks on Sunday, federal regulators who intervened to protect their customers claimed that the collapses did indeed represent systemic threats to the economy.
Back in 2015, SVB’s CEO Greg Becker testified before the U.S. Senate, claiming that his bank “does not present systemic risks.”
“These new burdens and the related compliance costs and necessary management time and other human resources are significant,” Becker said to Congress, “and will require us 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.”
It was Becker himself who suggested that Congress raise the threshold from $50 billion or less in assets to $250 billion; SVB ultimately had around $209 billion in assets at the time of its collapse, thus making it the second-largest bank failure in American history, only behind the 2008 crash and subsequent recession.