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Democrats Defend Vote For Deregulation Law Blamed For SVB Collapse

© AP Photo / Steven SenneCustomers and bystanders form a line outside a Silicon Valley Bank branch location
Customers and bystanders form a line outside a Silicon Valley Bank branch location - Sputnik International, 1920, 19.03.2023
The 2018 banking deregulation bill that exempted some banks from stricter Federal Reserve oversight and stress tests, has been a topic of discussion since the collapse of Silicon Valley Bank and Signature Bank.
Democrats are defending their vote for a 2018 banking deregulation bill that President Biden and other party members are blaming for the collapse of SVB and Signature Bank last week. The legislation was viewed by proponents as a way to offer relief to small and midsize banks that were struggling with rigorous regulations put in place under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
"Let’s be clear. The failure of Silicon Valley Bank is a direct result of an absurd 2018 bank deregulation bill signed by Donald Trump that I strongly opposed," Sen. Bernie Sanders (I-Vt.) wrote in a statement.
Forty-nine Democrats plus one Independent joined Republicans to pass the bill. While Democrats are now blaming that rollback for the banks' failures, proponents of the legislation argue that the regulations were impossible for small, medium-sized, and regional banks to comply with.
"You had a set of rules that literally applied to the largest few institutions in the country and also to our small and medium-size and regional banks. It was impossible, and they were all actually merging and selling to the larger banks and you had no community banks left in this country," said Rep. Josh Gottheimer (D-N.J.) during an interview with US media.
The 2018 bill raised the asset threshold for the regulations from $50 billion to $250 billion, freeing some banks from stricter Federal Reserve oversight and stress tests mandated under the Dodd-Frank Act.
Security guards let individuals enter the Silicon Valley Bank's headquarters in Santa Clara, Calif., on Monday, March 13, 2023. - Sputnik International, 1920, 18.03.2023
At Least 186 US Banks At 'Potential Risk of a Run' Similar to SVB, Economists Warn
At least one Democrat has expressed regret for their vote, Rep. André Carson (D-Ind.) who said it was time to "bring requirements closer in line to our original Dodd-Frank standards" due to "recent events." Still, most other Democrats who voted for the 2018 bill still support it and caution against jumping to conclusions about the cause of the collapses.
"I don’t know all the facts," said Sen. Gary Peters (D-Mich.). "Right now we got an investigation going on; the feds are gonna look at exactly what happened. I don’t think we should jump to any conclusions, so we actually investigate and look at the facts."
Those exempted from the regulations included Silicon Valley Bank and Signature Bank, which both subsequently collapsed, with SVB collapse becoming the second largest one in US history with unclear aftermaths.
The Justice Department and the Securities and Exchange Commission alongside with the Federal Reserve are all investigating recent collapses.
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