Former Congressman Barney Frank and Senator Elizabeth Warren are at odds over the recent collapse of two banks, Silicon Valley Bank and Signature, which have been linked to panic in the cryptocurrency market. Frank believes the collapse had nothing to do with the 2018 banking law that relaxed oversight, while Warren is placing the blame squarely on Trump-era changes.
In an interview, Frank said, “I don’t think that had any impact. They hadn’t stopped examining banks.” However, Warren, who helped design the 2010 banking law, wrote in a New York Times op-ed that stricter oversight would have been necessary had the 2018 law not been rolled back. She argued that had the requirements not been repealed, “when an old-fashioned bank run hit SVB, the bank couldn’t withstand the pressure — and Signature’s collapse was close behind.”
Frank, who served on Signature’s board since 2015, blamed the bank’s digital assets business and the “nervousness and beyond nervousness from SVB and crypto” for the run. He also said other lenders were in trouble the last few days, with the Federal Home Loan Bank telling Signature when it applied for money on Friday that “they didn’t have enough to go around because they were getting so many requests.”
The former congressman believes that had the government announced its deposit backstop on Friday, “we wouldn’t have had the problem.”
Meanwhile, Frank and Warren appear to agree on the need for greater depositor protections, with the Biden administration and regulators essentially pledging to back all deposits at the failed banks. Warren said that regulators should reform deposit insurance so that during this crisis and in the future “businesses that are trying to make payroll and otherwise conduct ordinary financial transactions are fully covered.” Frank also wants Congress to revive the idea of expanding deposit insurance, especially for businesses.