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- Sen. Elizabeth Warren blames 2018 laws of Trump’s era.
The recent banking crisis sparked a blame game. Signature board member Barney Frank blames crypto panic, while Sen. Warren blames Trump. Both former Rep. Frank and Elizabeth Warren are regarded as architects of post-2008 Wall Street regulations, and these two are locking horns over the matter.
Barney Frank vs. Elizabeth Warren
Frank, who also chaired the House of Financial Committee during the global financial crisis, wrote comprehensive new rules enacted in 2010 and served as a board member to now closed, startup-friendly Signature Bank.
According to Frank, the crypto panic began last year and is primarily the main cause of Signature Bank’s failure. As his bank was among the ones serving the industry, the recent failure of Silicon Valley Bank compounded the blows causing Signature to be closed by authorities.
However, he does not think that the bipartisan regulatory rollout signed by former President Donald Trump in 2018 does not play a major role here. Regardless, the bill was supposed to ease some regulations on mid-size and regional banks, like Signature, as the rollout couldn’t stop the authorities from examining the banks.
On the other hand, Sen. Elizabeth Warren completely differed from Frank’s views and placed complete blame on the changes made during Trump’s tenure. Many banks enjoyed a relaxed oversight then, and Signature emerged as a prime example of what was wrong in the process.
Further arguing that the stricter directions that Congress and the Federal Reserve levied could have made SVB and Signature better equipped to handle the financial shocks. During an interview, Warren said that the banks should meet higher capital standards, be subjected to timely stress tests, and have regular supervision; this would help catch stress points that may one day drown the bank.
Implications of the recent crisis
The battle between Warren and Frank can be considered a teaser of what’s coming next while Democrats prepare to respond to the banking crisis. Team Warren wishes Washington to restore the tough regulations of 2018, while Team Frank does not see problems in current laws.
Frank has been on Signature’s board since 2015 and thinks that till late bank was in good shape. The panic generated around SVB and crypto and the chain of events that started from the FTX implosion were the reason behind its fallout. Right now, the bank’s fate lies at the hands of regulators; they might sell it.
The laws of 2018 eased the banking regulations that encouraged some, while Frank advocated raising the $50 billion asset threshold in 2010, triggering a stricter oversight. The framework was changed by Congress, where regular scrutiny was done after reaching $100 billion in assets, and many stricter regulations shall be faced after reaching $250 billion.
Signature bank seemingly took advantage of the 2018 laws, with its set only $44 billion then. But reached $110 billion before the fallout.
Warren is now citing these banks’ fallout as why 2018 laws played a major role in the recent crisis. The law was specially designed to allow banks between asset brackets of $50 and $250 billion to play high-stake games with people’s money. This cannot be allowed and must be dealt with tighter regulations.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
