The failure of a Silicon Valley bank has exposed fresh divisions on Capitol Hill over banking reform, as US lawmakers from both parties blame the lenders’ collapse and wrangle over future legislation to shore up the financial system.
Progressive Democrats heeded President Joe Biden’s call this week to “strengthen regulations for banks.” Elizabeth Warren, a Massachusetts senator, and California lawmaker Katie Porter quickly introduced a bill to repeal a 2018 law that eased more stringent rules put in place after the 2008 financial crisis.
But elsewhere in the party, and across the political aisle, lawmakers differed on how to respond to the result. The Senate’s top Democrat, Chuck Schumer, refrained from supporting the new proposal, telling reporters Wednesday only: “We need strong legislation and hopefully we can get something together that is bipartisan.”
Meanwhile, Republican Senator Steve Daines of Montana accused the Biden administration of providing “bailouts” that would put lenders and families in his home state “on the hook for Bay Area bank mismanagement.”
“The last thing the federal government should be doing is favoring wealthy elites over hardworking families,” he added.
Analysts say such a split is likely to prove an obstacle to passing any legislation related to the outcome, especially since Democrats control the Senate by a narrow majority, and Republicans hold the House of Representatives.
“The crisis is an awful lot to waste and is a catalyst for greater attention and progress on anything related to the collapse of the SVB and the government’s response,” said Ben Coltun, director of research at Beacon Policy Advisors. But, he added: “It’s hard to see a way forward on any kind of legislation.”
The White House has sought to link SVB’s collapse to the Trump administration’s unwinding of Dodd-Frank – the 2010 law that overhauled the US financial regulatory system – which included lifting from $50bn the threshold for banks deemed “too big to fail”. $250bn in assets.
Less than a week after SVB’s collapse, several proposals are circulating in Congress, with dozens of Democrats signing on to Warren and Porter’s measures to repeal the Trump-era changes. However, like Schumer, many have so far refrained from doing so.
Meanwhile, Republican lawmakers are on the offensive, accusing Democrats of “blame-shifting” and “knee-jerking and rushing to the institution of excessive regulations.”
“The fact is that President Biden — through all the spending he’s done in the last Congress and the last two years — has driven inflation to the point where wage earners have to get a 14.8 percent wage increase. That kind of inflation,” Mike Crapo, a Republican senator from Idaho who led the 2018 reform, Fox Business told Tuesday.
Republican Speaker of the House Kevin McCarthy has also tried to link the bank failures to the administration’s fiscal policies, saying in a tweet on Tuesday: “Biden’s reckless spending led to record inflation and rapid interest rate hikes that broke family budgets and banks. But we must restore fiscal sanity.” .”
Meanwhile, Kevin Cramer, a Republican senator from North Dakota who, like Crapo, sits on the powerful Senate Banking Committee, urged caution.
“This situation calls for monitoring to uncover the cause of recent events and the bureaucratic response to them,” Cramer said. “Instead of knee-jerk reactions to the organization and rushing for excessive regulations, this development requires a level-headed assessment.”
Other Republicans have invoked the culture wars in their response, claiming that the SVB’s commitments to diversity, equality and inclusion, and environmental, social and governance considerations, have undermined its ability to remain solvent.
“So these SVB people spend all their time stirring up garbage (‘climate change solutions’) instead of real banking and now want a handout from taxpayers to save them,” Senator Josh Hawley, Republican of Missouri, tweeted earlier this week.
Hawley has since introduced his own bill with Senator Mike Braun, Republican of Indiana, that would prohibit banks from passing on to customers any costs associated with “special assessment” fees charged by the Federal Deposit Insurance Corporation.
Former Democratic Senator Heidi Heitkamp of North Dakota, who co-sponsored the 2018 rollback of Dodd-Frank with Crapo, expressed anger at both progressive members of her own party who are calling for a quick reversal of the changes and those who are fit to score political points. is
“This is the problem in Washington. Before people have the facts, before people do the analysis, they go straight to their political ideology and say, look, this is why,” she said. “Everybody wants to solve the problem before they understand what the problem is. .”
