Sen. Elizabeth Warren is now holding up Signature — and SVB — as a reason why Congress and the regulators should reverse any light-touch bank supervision triggered by the 2018 law. | Francis Chung/POLITICO
The rift between Frank and Warren is just a preview of what’s to come as Democrats sort out positions on how to respond to the latest banking crisis.
Former Rep. Barney Frank and Sen. Elizabeth Warren — two key architects of the post-2008 system of Wall Street regulation — are at odds over what’s dragging down banks once again.
Frank, who chaired the House Financial Services Committee in the wake of the global financial crisis and wrote sweeping new rules enacted in 2010, most recently served on the board of New York’s Signature Bank, which regulators shut down Sunday.
From his front-row seat, he blames Signature’s failure on a panic that began with last year’s cryptocurrency collapse — his bank was one of few that served the industry — compounded by a run triggered by the failure of tech-focused Silicon Valley Bank late last week. Frank disputes that a bipartisan regulatory rollback signed into law by former President Donald Trump in 2018 had anything to do with it, even if it was driven by a desire to ease regulation of mid-size and regional banks like his own.
“I don’t think that had any impact,” Frank said in an interview. “They hadn’t stopped examining banks.”
But Warren, a fellow Massachusetts Democrat who designed landmark consumer safeguards that ended up in Frank’s 2010 banking law, is placing the blame firmly on the Trump-era changes that relaxed oversight of some banks and says Signature is a prime example of the fallout. Warren argues that, had Congress and the Federal Reserve not rolled back stricter oversight, Silicon Valley Bank and Signature would have been better able to withstand financial shocks.
“They should have to meet higher capital standards, they should be subject to stress tests and they should have regular supervision that would catch exactly the kind of mistake that SVB made, mistakes about the failure to hedge risk and mistakes about concentrating in one industry,” Warren said in an interview Monday.