Anyone who doubted how detrimental Trump administration policies would be should analyze the damage unfolding for those trampled by Silicon Valley Bank’s collapse. On May 24, 2018, Trump signed into law the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Reform Act”). This was a regulatory relief bill for regional and community bill, which bank lobbyists and numerous politicians had fought hard for.
The argument at the time was that many of the provisions in the Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) were ‘one size fits all.’ Despite any proof, those lobbying for the EGRRCPA argued that capital, liquidity, and stress requirements for regional and community banks would be detrimental to the economy. In a number of Forbes columns, I argued that the weakening of bank regulations under Trump would be the seeds for the next financial crisis.
Thanks to Trump and his supporters this all changed. Some of the key changes that EGRRCPA made were:
Increasing the asset threshold for “systemically important financial institutions” or, “SIFIs,” from $50 billion to $250 billion.
Immediately exempting bank holding companies with less than $100 billion in assets from enhanced prudential standards imposed on SIFIs under Section 165 of the Dodd-Frank Act (including but not limited to resolution planning and enhanced liquidity and risk management requirements).
Exempting in 18 months bank holding companies with between $100 billion and $250 billion in assets from the enhanced prudential standards.
Limiting stress testing conducted by the Federal Reserve to banks and bank holding companies with $100 billion or more in assets.
Under Dodd-Frank’s Title I, any bank in the U.S. with an asset size of $50 billion or more could be designated as a domestically systemically important bank (D-SIB). This would then allow national bank regulators like the Federal Reserve to impose what are called enhanced prudential standards. These include rules about:
capital, which purpose is to sustain unexpected losses,
liquidity, including calculating the liquidity coverage ratio (LCR) and liquidity stress tests, and
bank resolution plans, referred to as living wills.
Just for YOU DUMMIES
This mess was left behind by Congressional Republicans and the Trump administration who were too deep in the big banks’ pocket to care about the consequences of gutting financial industry oversight. The chickens came home to roost this week in the Republican war against Wall Street reform and consumer financial protections.
Under the Republican roll back of Dodd-Frank, major institutions like Silicon Valley that oversee trillions of dollars in assets have far less of a burden to prove they can stay standing in difficult economic times. This predictable disaster should give serious pause to the current MAGA House majority who are pursuing further roll backs of consumer financial protections after taking money hand over fist from Wall Street banks – but don’t count on it.”
Washington D.C. – Be wary of revisionist history from Republicans in Congress today amid the sudden collapse of Silicon Valley Bank, “the largest U.S. banking failure since the 2008 financial crisis and the second-largest ever.”
In fact, conditions for the collapse were made perfect under Republican-sponsored, Wall Street-pushed bill signed into law by President Trump in 2018 that severely watered down risk-assessment rules for two dozen of the largest banks that collectively hold trillions of dollars in assets and received tens of billions of dollars in TARP bailout funds after the 2008 financial crisis.
These banks include Silicon Valley, whose CEO lobbied hard for the Dodd-Frank roll back – which ironically led to his own bank’s demise and a questionable decision to dump millions of dollars in stock in the company just two weeks ago.
Despite warnings at the time from consumer advocates including Accountable.
US that removing Dodd-Frank safeguards invited the same kind of risky behavior that led to the financial crisis, the so-called ‘Economic Growth, Regulatory Relief, and Consumer Protection Act’ passed with unanimous Republican support after taking millions of dollars from the financial industry.
So apparently President Biden wants to increase government even more. Biden Admin Makes Major Announcement After Silicon Valley Bank Collapse - Truth Press
Hello, old friends, Mr. Pain here. Now, as you all know, I have warned repeatedly that Biden would crash the economy. This is only the tip of the iceberg. Biden lied to you about inflation and he's lying to you about the banking crisis. Pain is here. More is coming.
Bank stocks are plummeting, even after intervention
The Biden administration scrambled this weekend to restore confidence in the US banking system after the collapse of Silicon Valley Bank and Signature Bank.
But investors signaled in Monday trading that the plan wasn't enough. Stocks of regional banks tumbled to record lows in Monday trading and were in and out of trading halts as their share prices moved remained volatile.
Shares of First Republic fell nearly 66% Monday afternoon.
Shares of Western Alliance Bancorp plummeted about 60%.
PacWest Bancorp fell more than 34%.
First Horizon stock fell about 23%.
So what explains the post-backstop plan plunge?
Wall Street remains worried that the Federal Reserve's aggressive interest rate hikes will continue to roil regional banks.
Markets are anxious to know "whether the Fed will lift rates at all, or will they announce a pause in the monthly Quantitative Tightening program. Or both," said Quincy Krosby, chief global strategist for LPL Financial.
It will be difficult to get an answer. The Fed just entered its mandated quiet period ahead of its policy meeting next week.
JPMorgan's David Kelly said in a note Monday morning that the Biden administration's plan may help a bit, but markets won't be satisfied until the Fed makes a decision around interest rates.
"These actions may be sufficient to stem some of the current turmoil in global markets emanating from smaller US banks," he said. "However, it should be noted that these problems were largely set up by over-easy Fed policy for many years and are now being triggered by excessive tightening."
Back when interest rates were near zero, US banks scooped up lots of Treasuries and bonds. Now, as the Fed hikes rates to fight inflation, those bonds have declined in value.
When interest rates rise, newly issued bonds start paying higher rates to investors, which makes the older bonds with lower rates less attractive and less valuable.
The result is that US banks now have a large amount of unrealized losses on their books and may lack liquidity.
Treasury yields, meanwhile, have receded to historic lows — 2-year notes have fallen more than 100 points since Wednesday and are on track to notch their largest three-day drop since Black Monday in October 1987 — as Wall Street worries about about the economic and market fallout of the bank failures.
"The move into the Treasury market reflects concern that the administration's attempts to calm investor anxiety won't work, and that ensuing panic and fear could quickly lead to the dreaded "contagion" that envelops the market's psyche," said Krosby.
Growth is found only in adversity.
Bookmarks