US Democrats blame 2018 deregulation bill for SVB collapse
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US President Joe Biden and other Democrats blame the collapse of Silicon Valley Bank and Signature Bank on the 2018 deregulation bill voted for by Republicans, 49 Democrats, and one independent.
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A Silicon Valley Bank sign is shown in San Francisco, Monday, March 13, 2023. (AP)
Since the collapse of Silicon Valley Bank and Signature Bank, discussion regarding the 2018 banking deregulation bill, which exempted some banks from stricter Federal Reserve oversight and stress tests, has resurfaced.
US President Joe Biden and other party members have blamed the 2018 bill for the collapse of the two banks last week, however, Democrats are defendomg their vote in support of the bill. The deregulation legislation was considered, by its advocates, as a tool to offer small and midsized banks some relief, in contrast with the rigorous regulations imposed under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
Senator Bernie Sanders said in a statement, "Let’s be clear. The failure of Silicon Valley Bank is a direct result of an absurd 2018 bank deregulation bill signed by Donald Trump that I strongly opposed."
The bill was passed with the support of Republicans, one independent, and 49 Democrats who now, following the collapse and other Democrats' accusations, have argued that the regulations were impossible for small, medium-sized, and regional banks to comply with.
"You had a set of rules that literally applied to the largest few institutions in the country and also to our small and medium-size and regional banks. It was impossible, and they were all actually merging and selling to the larger banks, and you had no community banks left in this country," said Representative Josh Gottheimer during an interview.
Rep congressman blames SVB, other banks failure on 'Bidenflation'
Biden's economic policies are to blame for SVB's collapse, according to Republican Congressman Paul Gosar.
Gosar told Sputnik on Thursday that congressionally-approved bailouts are to be considered in the future to rescue the failing US banks following the collapse of Silicon Valley Bank as a result of President Biden's economic policies.
California regulators shut down SVB last Friday, after the bank became the largest to collapse since the 2008 financial crisis. The bank's collapse is linked to the increased interest rates set by the Federal Reserve System, causing impairment of assets in the balance sheets of financial authorities.
Two days later, the New York-based Signature Bank was also shut down by authorities, recording the third-largest bank failure in US history.
After the failures of 3 #US banks, concern is mounting in the financial sector about whether this would create a chain of bank failures that would harm the US economy significantly.
— Al Mayadeen English (@MayadeenEnglish) March 16, 2023
Here are the worst bank failures in US history.#SVBCollapse pic.twitter.com/dqt0PegklY
"SVB invested a large portion of its deposits in mortgage-backed securities and Treasury bonds. When interest rates were low, thanks in large part to President Trump, it seemed like a sound investment. However, when Bidenflation started to run out of control it forced the Fed to raise interest rates," he added.
The Congressman moves on to mention that as interest rates rose, SVB's mortgage value-backed securities and Treasury bond holdings fell drastically.
Read more: Canadian authorities temporarily control Canadian branch of SVB
