Democrats on Capitol Hill are defending their vote for a 2018 banking deregulation bill that President Biden and other members of the party blame for last week’s stunning collapse of Silicon Valley Bank and Signature Bank.

Forty-nine Democrats — 33 in the House and 16 in the Senate — plus Sen. Angus King (D-Maine), who is running for the Democrats, joined with Republicans in 2018 to pass the deregulation bill.

Nineteen of them are still in the House, all of whom will face voters next year, and 12 are in the Senate, five of whom are up for re-election in 2024. Sen. Kirsten Sinema (R-Ariz.), who was in the House in as a Democrat in 2018 and voted for the deregulation bill, will also be up for re-election next year.

Supporters of the law, which former President Trump signed, saw it as a way to ease small and medium-sized banks that have struggled with strict regulations imposed under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. was adopted after the 2008 financial crisis.

But a number of Democrats are now blaming the rollback on the failures of Silicon Valley Bank and Signature Bank, which were exempted from the rules in 2018, leaving supporters of the measure on the defensive as the bank blame game heats up on Capitol Hill.

Asked if she regrets voting for the bill, Sen. Debbie Stabenow (R-Mich.), a member of the Democratic Party leadership who is retiring next year, told The Hill, “Not at all.”

“It was very important to me to make sure that some flexibility was given to our small banks, community banks and credit unions that did not cause the financial crisis in 2008,” she said.

Rep. Josh Gottheimer (DN.J.) also said he did not regret his rollback vote, calling the Dodd-Frank rules “impossible” for small, medium and regional banks.

“You had a set of rules that literally applied to several of the largest institutions in the country, as well as our small and medium-sized and regional banks. It wasn’t possible, and they were all actually being merged and sold to the bigger banks, and there were no community banks left in this country,” he told CNN in an interview on Tuesday.

The 2018 bill — officially known as the Economic Growth, Regulation, and Consumer Protection Act — exempted some banks from stricter Federal Reserve oversight and stress tests mandated by the Dodd-Frank Act by raising the asset threshold for those rules from $50 billion dollars to 250 billion dollars. .

Silicon Valley Bank and Signature Bank fell into that range.

“Let’s explain. The Silicon Valley bank collapse is a direct result of Donald Trump’s absurd 2018 bank deregulation bill, which I strongly opposed,” Sen. Bernie Sanders (I-Vt.). writes in a statement.

Sen. Elizabeth Warren (D-Mass.), who voted against the 2018 bill and is now leading efforts to repeal the legislation, said Silicon Valley Bank (SVB) and Signature Bank “were subject to tougher liquidity and capital requirements to withstand financial turmoil.” if Congress and the Federal Reserve did not roll back tighter oversight.

“They should conduct regular stress tests to identify their vulnerabilities and strengthen their businesses,” she said. wrote in a New York Times article. “But because these requirements were lifted when SVB‌., the bank was unable to withstand this pressure and the collapse of Signature was not far behind.

Silicon Valley Bank, a California-based institution that mainly catered to startups, was seized by federal regulators last Friday after a mass exodus from the bank amid liquidity problems. A few days later, government orders seized Signature Bank, a New York institution that primarily dealt with real estate companies and law firms, after another rush by customers to withdraw deposits.

The failure of Signature Valley Bank was the second largest bankruptcy in American history, and the failure of Signature Bank was the third largest.

Sen. Tim Kaine (R-Va.), who voted for the 2018 deregulation bill, told The Hill that Old Dominion lost some of its banks between 2010 and 2018 because smaller banks faced the need to hire compliance departments, decided to sell more large institutions, which led to the closure of branches and dismissal of employees.

“My community banks, when you get a few years of implementation, how would you lay the groundwork for this problem. They said, “Hey, look, the law that was designed to stop too big to fail is also accelerating too small to succeed,” said Kaine, who is up for re-election in 2024.

“Community banks when [2018] the bank account has been drawn up, they say we strongly support it. They’ve been strong and still are, and they’ve done a good job over the last few years in Virginia,” he added.

Sen. Gary Peters (D-Michigan) also said he doesn’t regret his 2018 vote in favor of the deregulation bill and cautioned against jumping to conclusions about the causes of the collapse.

“I don’t know all the facts,” Peters said. “We have an investigation now; the feds will be looking at exactly what happened. I don’t think we should jump to conclusions, so we’re actually investigating and looking at the facts.”

The Department of Justice and the Securities and Exchange Commission are both investigation into the collapse of Silicon Valley Bank, and the Federal Reserve launched its own investigation. The central bank said a review of the investigation, which is being led by deputy chairman for supervision Michael Barr, will be published on May 1.

Sen. Chris Coons (DD), who voted for the 2018 bill, said it was “premature” to link the five-year-old bill to last week’s collapse.

“I think it’s premature to say that we know that these actions by regulators under the previous administration — or these legislative actions under the previous administration — made a difference,” he told The Hill. “We don’t know that.”

The senator cited other factors that could have led to the bank’s collapse, including a lack of leadership, a failure to plan for inflation risk and a failure of regulatory oversight.

However, Warren and Rep. Cathy Porter (D-Calif.) draw a straight line between faltering banks and the 2018 bill. The progressive pair, along with dozens of other Democrats, introduced a bill Tuesday that would undo the 2018 Dodd-Frank rollback, restoring the regulatory cap to $50 billion.

The legislation comes after Biden called on Congress and banking regulators this week to “strengthen rules for banks to reduce the likelihood of this type of failure happening again and to protect American jobs and small businesses.”

Stabenow said she has concerns about the threshold in the Warren-Porter bill.

“I originally supported the bill because I felt the $50 billion threshold was too low. And so she drives him all the way back to it. And this is my question,” she said.

“And I think we need to look at, you know, what really happened here? I mean the complete incompetence of this bank, of course. And the question is, what will matter? That’s what I’m interested in,” she added, later saying, “I think it’s just something we can do to address this situation without going back to hurting the small banks.”

Coons said it was “premature” to consider “specific decisions” if the cause of the bank’s failure remains unknown, and Kaine said he wanted to review Barr’s analysis first before making a decision on Warren’s bill.

But when Barr says the rollback would be a good thing, Kane said he would “be sympathetic”.

One supporter of Warren’s bill may be Rep. Andre Carson (D-Ind.), who supported a rollback in 2018. When asked about his vote, the congressman told The Hill in a statement that in light of the bank closures, it was time to move standards back toward Dodd-Frank.

“In light of recent events, I believe it is time to revisit and update these changes to bring the requirements closer to our original Dodd-Frank standards, which I proudly voted for,” he told The Hill. “This will help strengthen our financial system so that it remains resilient and sound during economic ebbs and flows.”

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