Rep. Katie Porter (D-Calif.) and Sen. Elizabeth Warren (D-Mass.) have helped unveil a new legislative proposal that would undo a key component of a banking reform law passed in 2018, when Trump was president.
In short, the targeted changes lifted the level at which financial institutions — like Silicon Valley Bank, which recently financially imploded and came under government control — were subjected to increased levels of government scrutiny. At Silicon Valley Bank, among the issues was apparently that the institution was facing difficulties in dealing with requests from customers for withdrawals, with the value of some of the bank’s assets recently struggling. The proposal from Porter, Warren, and dozens of others across both chambers of Congress would push the level of business activity at which that additional regulatory scrutiny is activated back down to $50 billion in assets.
“Americans deserve to know their money is safe when they deposit it in the bank,” Porter said. “In 2018, politicians rolled back critical regulations protecting Americans’ deposits—ignoring warnings from financial experts in favor of Wall Street special interests. I’m calling on Congress to restore common-sense guardrails that keep corporate greed in check and restore confidence in our financial system.” It is not actually a given that the proposal will get unified or nearly unified support from Democrats, some of whom did vote in favor of the original rollback of some of that regulatory power under Trump. NBC cited a Democratic Senator, Jeanne Shaheen, who voted for the rollback and didn’t express regrets for doing so.
The proposal from Porter, Warren, and the others deals with, as summarized in a press release from the California Dem, which banks are under rules for regular stress testing and enhanced liquidity, risk management, and resolution plan, or “living will,” requirements. “In 2018, I rang the alarm bell about what would happen if Congress rolled back critical Dodd-Frank protections: banks would load up on risk to boost their profits and collapse, threatening our entire economy – and that is precisely what happened,” Warren added.
Elsewhere, the Biden administration is covering deposits made at Silicon Valley Bank, but regular taxpayer funds won’t be used. Instead, that money is coming from a federal fund paid into by financial institutions themselves via fees for the program insuring deposits. Investors in the bank won’t be covered by the financial assistance. Biden has also insisted that there’s no reason to worry about the overall stability of the U.S. banking system, with authorities quickly intervening to stop these problems from rippling further outwards.
