Senator Elizabeth Warren slammed a 2018 piece of legislation that deregulated the financial industry as contributing to the collapse of Silicon Valley Bank.
The Massachusetts Democrat and longtime critic of the financial industry made the remarks during a Senate Finance Committee hearing with Treasury Secretary Janet Yellen.
Specifically, Sen Warren cited a 2018 piece of legislation that former president Donald Trump signed called the Economic Growth, Regulatory Relief, and Consumer Protection Act and said it led to the Federal Reserve’s actions and to the collapse of the bank.
Over the weekend, Ms Yellen, Federal Reserve Chairman Jerome Powell and Federal Deposit Insurance Corporation Chairman Martin Gruenberg announced it would protect the money of depositors who banked with the California bank.
Sen Warren noted how the law weakened aspects of the 2010 Dodd-Frank law that passed after the 2008 financial crisis, specifically, enhanced liquidity requirements that ensured that banks had enough money to meet their obligations in times of stress; requirements for banks to hold a certain amount of capital so they could absord losses; and that they had regular resolution plans to help financial regulators safely wind banks down in times of crisis.
“All of these were weakened in 2018, and when SVB failed, this is a part in my view of the Fed’s actions that led to weaker regulation,” he said. Sen Warren said that many Republicans have sought to blame regulators for being asleep at the wheel.
“Believe me, I have questions for a lot of the banking regulators,” she said. “But Congress handed chair Powell the flame thrower that he aimed at the banking rules.”
Sen Warren quoted a line from when Mr Powell implemented the regulations saying the Federal Reserve was using the discretion Congress gave them.
“Translation, Congress opened the door to weaker, weaker regulations and I'm waltzing right through it,” Sen Warren said. “That’s true. Congress needs to close that door.”
