Last week, Silicon Valley Bank crumbled under the weight of a bank run, and fingers were quickly pointed at the controversial 2018 law that eased regulations for banks like SVB. The legislation, signed by then-President Donald Trump, raised the asset threshold from $50 billion to $250 billion for banks subject to enhanced regulations. This change was celebrated by banks like SVB, whose CEO, Greg Becker, had previously argued that the $50 billion limit would unnecessarily burden the bank.
President Biden and Senator Bernie Sanders Blame the Trump Era Law
Senator Bernie Sanders of Vermont blamed the “absurd” 2018 rollback for SVB’s failure. President Joe Biden also spoke on the subject criticizing the Trump-backed law as part of the problem.
The Law Had Bipartisan Support, but Many Opposed It
While the 2018 law garnered bipartisan support, the majority of congressional Democrats opposed it. Critics warned that loosening regulations for banks in this range could lead to another financial crisis. The nonpartisan Congressional Budget Office even noted that increasing the threshold would heighten the risk of failure for financial firms with assets between $100 billion and $250 billion.
Trump denies he had any role in the SVB implosion.
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Experts Weigh In
With SVB’s recent collapse, experts are divided on the extent to which the 2018 law contributed to its downfall. Some argue that the law made the bank more vulnerable, while others believe the bank’s issues would have persisted regardless of the law. Critics also point to Trump’s Federal Reserve appointees, who have been accused of lax supervision over banks.
Overall, it is difficult to determine whether SVB would have survived without the 2018 law, but the ongoing debate highlights the potential risks associated with deregulation in the financial sector.
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