Senator Bernie Sanders has pointed the finger at a banking law enacted during the Trump administration for the recent failure of the Silicon Valley Bank. Sanders blamed the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act for the collapse of the bank. The act was signed into law in May 2018 by former President Donald Trump and was viewed as a significant reduction of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Trump stated that the previous banking regulations “were in such trouble. One size fits all — those rules just don’t work.” The Dodd-Frank regulations were also criticized for “crushing community banks and credit unions nationwide.”
The 2018 act exempted smaller banks from stringent regulations and loosened rules that larger banks had to follow. The law also raised the asset threshold for “systematically important financial institutions” from $50 billion to $250 billion. With an estimated $209 billion in assets, the Silicon Valley Bank was no longer considered a systematically important financial institution, and therefore not subject to the tighter regulations that larger banks must adhere to.
Sanders strongly opposed the 2018 act, stating that the Trump administration had disregarded the lessons it should have learned from the 2008 Wall Street crash and the Enron scandal. He also urged against the bailout of Silicon Valley Bank, suggesting that any potential bailout should be 100 percent financed by Wall Street and large financial institutions. Sanders went on to caution against continuing down the road of “more socialism for the rich and rugged individualism for everyone else.”
Following a catastrophic bank run, the Federal Deposit Insurance Corporation shut down the Silicon Valley Bank on Friday. This makes it the largest bank failure in the US since the 2008 financial crisis. However, startups with money in Silicon Valley Bank exceeding $250,000 may be at risk of not being able to make payroll next week.
Sanders believes that the 2018 banking deregulation law should be repealed, and that too-big-to-fail banks should be broken up. Instead, he proposes addressing the needs of working families, rather than the risky bets of vulture capitalists.
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