Banking experts are pointing out that Silicon Valley Bank might have been able to handle interest rate pressures if Trump and congressional Republicans hadn’t rolled back Dodd-Frank banking regulations.
The New York Times reported:
Some banking experts on Friday pointed out that a bank as large as Silicon Valley Bank might have managed its interest rate risks better had parts of the Dodd-Frank financial-regulatory package, put in place after the 2008 crisis, not been rolled back under President Trump.
In 2018, Mr. Trump signed a bill that lessened regulatory scrutiny for many regional banks. Silicon Valley Bank’s chief executive, Greg Becker, was a strong supporter of the change, which reduced how frequently banks with assets between $100 billion and $250 billion had to submit to stress tests by the Fed.
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Liz Zelnick, Accountable.US’ Director of Economic Security and Corporate Power, pointed the finger of blame at Trump and congressional Republicans, ““This mess was left behind by Congressional Republicans and the Trump administration who were too deep in the big banks’ pocket to care about the consequences of gutting financial industry oversight. The chickens came home to roost this week in the Republican war against Wall Street reform and consumer financial protections. Under the Republican roll back of Dodd-Frank, major institutions like Silicon Valley that oversee trillions of dollars in assets have far less of a burden to prove they can stay standing in difficult economic times. This predictable disaster should give serious pause to the current MAGA House majority who are pursuing further roll backs of consumer financial protections after taking money hand over fist from Wall Street banks – but don’t count on it.”
The failure of Silicon Valley Bank is the biggest in the US since the 2008 financial crisis, and it is likely to not be the last.
Banks that are ill-equipped to handle the pressures that come with rising interest rates are at the most risk of failure.
It is almost as if regulatory safeguards are needed to protect both consumers and industries from their own worst impulses.
Republicans deregulate not based on sound public policy decision-making, but on ideology. The GOP’s ideology tells them that regulation is bad. Republicans have learned nothing from the financial crisis and Great Recession that they piloted the nation into,
The reason why it is often shortsighted and stupid to toss out regulations is that circumstances change.
There is common thread running through both the Norfolk Southern train derailment and the Silicon Valley Bank collapse.
In both cases, Donald Trump weakened government rules and oversight. While there may not be a direct line of causation between Trump’s actions and train derailments/bank collapses, the rolling back of rules and regulations helps to create a climate for the worst-case scenario to occur.