Senate Democrats who support rolling back regulation of mid-sized banks under President Donald Trump defended their vote despite the collapse of two key banks last week that raised fears of another costly financial crisis.
“The reason I voted for the bill is that my community banks really need it,” said Sen. Tim Kaine (D-Va.), one of 17 Senate Democrats who voted against the Trump-era legislation, told HuffPost on Tuesday.
The 2018 bill repeals parts of the Dodd-Frank Act, which Congress passed after the 2008 financial crisis to prevent the government from conducting another bank bailout. The bill raises the threshold for stricter regulation of banks with $50 billion in assets to just $250 billion.
The two banks that failed last week — Silicon Valley Bank and Signature Bank — had less than $250 billion in assets. (BuzzFeed, HuffPost’s parent company, banked with SVB.)
Critics of the 2018 bill say Congress immediately enabled a new bank failure when lawmakers allowed federal regulators to ease the requirement that banks hold a certain amount of assets in the case of deposits.
“Connect the dots,” said Sen. Elizabeth Warren (D-Mass.). “The 2018 rollback allowed the banks to take more risks in order to increase profits. So what did they do? They took more risks, increased profits, gave executives huge bonuses, and then blew up the banks.
But Democrats who sponsored the 2018 legislation now say they don’t regret doing so, saying their state’s small and rural financial institutions, which provide loans to Main Street businesses, need regulatory relief to survive.
“It’s hurting local communities and targeting, in particular, rural and underserved communities,” Kaine said.
The Virginia Democrat questioned whether other factors contributed to recent bank failures, including a “social media push” on deposits and mismanagement due to high interest rates.
“We need to figure out what went wrong, why it went wrong, how to fix it, how to make sure it doesn’t happen again,” added Sen. Tom Carper (D-Del.), who also voted for it. 2018 bill.
Sen. Michael Bennet (D-Colo.) also said he does not regret voting for easing regulations on banks, adding that “we have to do an analysis now to see what actually happened” in Silicon Valley Bank.
“The reason why I voted for the bill is that my community banks really need it.”
– Sen. Tim Kaine (D-Va.)
Congress warned in 2018 the regulatory rollback will increase the odds that medium-sized financial institutions will fail, potentially exposing the government to additional costs. Republicans, along with some Democrats, ignored the warning.
Warren and Rep. Katie Porter (D-Calif.) introduced legislation on Friday that would restore the original Dodd-Frank regulatory provisions on mid-sized banks, but the size is unlikely to go anywhere.
“Nobody came out [the 2018 legislation] is in any way the cause of what happened here,” Sen. Mike Crapo (R-Idaho) said. “There is no need for regulatory reform. The regulator has full authority to implement the necessary regulation.
Chaos in the banking industry also loomed large on the campaign trail.
Progressive Rep. Ruben Gallego, who is challenging Democrats for Sen. Kyrsten Sinema, an independent in Arizona in 2024, slammed the incumbent at a press conference today to support the deregulation bill.
“It’s just that he chose to give the banks freedom. And I didn’t,” Gallego said as he stood outside Silicon Valley Bank’s offices in the Phoenix suburb of Tempe. “Silicon Valley banks collapsed as a direct result of his choice.”
Gallego’s campaign noted that three longtime lobbyists for the bank gave Sinema the maximum campaign contribution allowed shortly before the vote.
The five-year gap between the vote and the collapse of the SVB meant that many Democrats voted for the bill in 2018 as a way to burnish their bipartisan credentials and win over the banking industry ahead of their re-election bids — including Sens. Jon Tester (D-Mont.) and Joe Manchin (DW. Va. .) – now faces a tough race for reelection again. And that complicates the Democratic response to the crisis.
“I am not saying that my party is innocent,” said Sen. Sherrod Brown (D-Ohio), currently the top Democrat on the Senate Banking Committee, told Bloomberg Radio on Tuesday. “There are some who don’t fight hard enough. I won’t name names, but there are some who don’t.
The Biden White House, for example, has typically not been shy about blaming the Trump administration’s deregulatory efforts for disasters — see its response to the train derailment in East Palestine, Ohio.
However, when speaking about the crisis on Monday, President Joe Biden avoided mentioning the Trump-era setback, perhaps as the government complicated the politics of the White House’s blitz against legislation supported by 17 Senate Democrats.
Gaggling with reporters on Air Force One on Monday, White House press secretary Karine Jean-Pierre briefly mentioned the legislation, but did not make it clear whether Biden would support the regulation again, promising there would be “conversations with experts and regulators.”
“The last administration rolled back some of those tough requirements,” he said after noting that Biden was vice president when Dodd-Frank was originally enacted. “That’s why, as you saw this morning and you heard from the president, he called on Congress and bank regulators to strengthen the rules so that bank failures like this cannot happen again, to protect American jobs, small businesses. .”