Senator Elizabeth Warren questions Treasury Secretary Janet Yellen and Federal Reserve Chairman Powell during a Senate Committee on Banking, Housing, and Urban Affairs hearing September 28, 2021 in Washington, DC
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Senator Elizabeth Warren questions Treasury Secretary Janet Yellen and Federal Reserve Chairman Powell during a Senate Committee on Banking, Housing, and Urban Affairs hearing September 28, 2021 in Washington, DC
Kevin Dietsch/Getty Images
Banks across the country assure their clients that they will not collapse like Silicon Valley Bank and Signature Bank. Sen. Elizabeth Warren, D-Mass., says Congress and the Federal Reserve are to blame for bank failures.
“Remember after the crash of 2008, we understood that if you don’t put pretty tight regulations on these big banks, they’re going to go out and build their profits by taking a lot of risk,” Warren told NPR’s Leila Fadel on Tuesday. morning edition.
“Then in 2018, the Republicans under Donald Trump said, no, we need to relax those regulations,” Warren said. “And they got some help from the Democrats and they finally passed a bill that rolled back that kind of protection for banks that had more than $50 billion but less than $250 billion.
“And sure enough, we saw the consequences of that over the weekend,” Warren said.
Sixteen Democrats joined Republicans in passing the Economic Growth, Regulatory Relief and Consumer Protection Act in March 2018 in a 67-31 vote. Warren voted against the legislation, as did Senate Majority Leader Chuck Schumer, who said Tuesday the Senate will investigate the causes of the bank collapse.
“Had the damage spread throughout our financial system, the deposits and savings of tens of millions of families and small businesses could have been at serious risk,” Schumer said speaking on the Senate floor. “(The) American people can rest assured that bank regulators have acted quickly and are doing everything they can to protect consumers. In the days and weeks ahead, Congress will be watching closely what caused the run on Silicon Valley Bank and how you can prevent similar events in the future.”
Barney Frank, former congressman and former Signature Bank board member, told NPR’s Juana Summers yesterday that these bank failures did not happen because of the reversal of the Dodd-Frank Act but because of cryptocurrencies.
Warren disagreed, saying, “In both cases, it was about increasing risk to increase profit.”
“It’s not just Congress. It’s also the Federal Reserve that intervened.”
the federal reserve announced a review SVB’s supervisory and regulatory body on Monday after its takeover by financial regulators led to the biggest bank failure since the 2008 financial crisis.
“Look, for this investigation to have any credibility, Chairman (Jerome) Powell has to recuse himself,” Warren said. “When the law was weakened, he allowed the Federal Reserve to relax those regulations. Chairman Powell led the charge. He not only relaxed the regulations, but he went further than some people thought the law allowed.”
“You know, this is part of the reason I opposed his renomination to be Fed Chairman. I thought this was a very dangerous move on his part.”
For people who use smaller, regional banks, Warren says not to worry.
“The federal government stepped in and said we’re going to make sure depositors are protected. And that means everyone should breathe a big sigh of relief on that issue. Now, we need to make changes to the law so this problem doesn’t get fixed.” not happen again”.
Speaking later on Tuesday in the Senate, Warren went on to stress that Congress and the Federal Reserve must re-implement tough rules for financial institutions to prevent future banking catastrophes.
“The bank failures our nation experienced this weekend were completely avoidable if Congress and the Fed had done their job and maintained strong oversight of the big banks,” he said. “And now we must act quickly to prevent the next crisis by repealing the dangerous Trump-era provisions that weakened banks.”
Federal officials are attempting to auction off some $200 billion in assets, which Silicon Valley Bank owns. Any support for deposits that does not come from the insurance fund, or asset auctions, will be based on special assessments on banks, or essentially a tax that most of the largest banks will bear the brunt of, according to officials at the Federal Deposit Insurance Corporation.
Republican Sen. James Lankford of Oklahoma said Tuesday that the special assessment is a “clandestine tax increase” for all Americans, since the money comes from all American banks. He said that means banks in his home state and in “rural towns are about to pay a premium rate in order to bail out millionaires in San Francisco.”
“Now listen, I don’t want to see bank contagion either, but let’s be honest, what’s really happening is a clandestine tax hike for all Americans, just without using the IRS to do it,” Lankford said. “They’re using community banks to do it across the country, to quickly charge them a higher fee, which they know will mean a higher fee for people who are members of their banks. And that’s how it’s going to be covered.”
There is currently no ban on banks recovering the assessment by charging their customers.
The digital story was edited by Heidi Glenn, Padmananda Rama, and Majd Al-Waheidi. NPR business reporter Bobby Allyn contributed to this report.
