Your Evening Briefing: Deregulation Gets Some Blame for SVB Blowup

President Joe Biden sought on Monday to reassure markets and consumers that any collateral damage from the implosion of Silicon Valley Bank would be limited. As the government emphasized no taxpayer dollars would be used to clean up the mess (thus obviating any use of the word “bailout”), he also promised to hold responsible those behind the collapse of SVB as well as Signature Bank, whose crypto industry ties may have led to its undoing. “Americans can have confidence that the banking system is safe. Your deposits will be there when you need them,” Biden said at the White House.

So who is to blame? The SVB failure has many pointing fingers at Donald Trump-era deregulation. Eight years ago, SVB Chief Executive Officer Greg Becker urged Congress to pass legislation that would let his firm skate on all the work that comes with stress tests and resolution plans. Legions of executives from other regional lenders made a similar case. Eventually, they got their wish. With more than a few Democrats joining Republican majorities in backing the measure, Trump in 2018 signed a law that allowed mid-sized banks like SVB to skirt some of the strictest post-financial crisis regulations. “We’ve known since 2008 that stronger regulations are needed to prevent exactly this type of crisis,” said Democratic Representative Ro Khanna, who represents Silicon Valley. “Congress must come together to reverse the deregulation policies that were put in place under Trump.” The policies Democrats want to reanimate stem from the famous Dodd-Frank bill that arose from the ashes of 2008. One of the deeper ironies of today’s news is that Barney Frank—the Frank in Dodd-Frank—helped oversee Signature Bank.