Elizabeth Warren knows who is responsible for the bank collapse we saw in
Silicon Valley this past week. She calls out big bank execs and their
corporate lobbyists in a [ [link removed] ]New York Times op-ed that is circulating in
power corridors today.
She also calls out the execs who gave themselves bonuses on Friday as
their bank collapsed, also known as LOOTING.
Please read the op-ed below and then [ [link removed] ]share Warren's op-ed on Facebook
and [ [link removed] ]share it on Twitter. -- The PCCC Team ([ [link removed] ]@BoldProgressive)
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ELIZABETH WARREN: Silicon Valley Bank Is Gone. We Know Who Is Responsible.
No one should be mistaken about what unfolded over the past few days in
the U.S. banking system: These recent bank failures are the direct result
of leaders in Washington weakening the financial rules.
In the aftermath of the 2008 financial crisis, Congress passed the
Dodd-Frank Act to protect consumers and ensure that big banks could never
again take down the economy and destroy millions of lives. Wall Street
chief executives and their armies of lawyers and lobbyists hated this law.
They spent millions trying to defeat it, and, when they lost, spent
millions more trying to weaken it.
Greg Becker, the chief executive of Silicon Valley Bank, was one of the
many high-powered executives who lobbied Congress to weaken the law. In
2018, the big banks won. With support from both parties, President Donald
Trump signed a law to roll back critical parts of Dodd-Frank. Regulators,
including the Federal Reserve chair Jerome Powell, then made a bad
situation worse, letting financial institutions load up on risk.
Banks like S.V.B.-- which had become the 16th largest bank in the country
before regulators shut it down on Friday-- got relief from stringent
requirements, basing their claim on the laughable assertion that banks
like them weren’t actually “big” and therefore didn’t need strong
oversight.
I fought against these changes. On the eve of the Senate vote in 2018, I
warned, “Washington is about to make it easier for the banks to run up
risk, make it easier to put our constituents at risk, make it easier to
put American families in danger, just so the C.E.O.s of these banks can
get a new corporate jet and add another floor to their new corporate
headquarters.”
If you're on Twitter, please also [ [link removed] ]share this:
[ [link removed] ]HEADLINE: Silicon Valley Bank employees received bonuses hours before
government takeover [ [link removed] ]PCCC TWEET: Let's call this what it is: LOOTING the
bank. What happens to regular people who loot a bank? Criminal
accountability. Those who looted the bank should go to jail and have their
bonuses and salary clawed back.
I wish I’d been wrong. But on Friday, S.V.B. executives were busy paying
out congratulatory bonuses hours before the Federal Deposit Insurance
Corporation rushed in to take over their failing institution -- leaving
countless businesses and nonprofits with accounts at the bank alarmed that
they wouldn’t be able to pay their bills and employees.
S.V.B. suffered from a toxic mix of risky management and weak supervision.
For one, the bank relied on a concentrated group of tech companies with
big deposits, driving an abnormally large ratio of uninsured deposits.
This meant that weakness in a single sector of the economy could threaten
the bank’s stability.
Instead of managing that risk, S.V.B. funneled these deposits into
long-term bonds, making it hard for the bank to respond to a drawdown.
S.V.B. apparently failed to hedge against the obvious risk of rising
interest rates. This business model was great for S.V.B.’s short-term
profits, which shot up by nearly 40 percent over the last three years --
but now we know its cost.
S.V.B.’s collapse set off looming contagion that regulators felt forced to
stanch, leading to their decision to dissolve Signature Bank. Signature
had touted its F.D.I.C. insurance as it whipped up a customer base tilted
toward risky cryptocurrency firms.
Had Congress and the Federal Reserve not rolled back the stricter
oversight, S.V.B. and Signature would have been subject to stronger
liquidity and capital requirements to withstand financial shocks. They
would have been required to conduct regular stress tests to expose their
vulnerabilities and shore up their businesses. But because those
requirements were repealed, when an old-fashioned bank run hit S.V.B., the
bank couldn’t withstand the pressure -- and Signature’s collapse was close
behind.
On Sunday night, regulators announced they would ensure that all deposits
at S.V.B. and Signature would be repaid 100 cents on the dollar. Not just
small businesses and nonprofits, but also billion-dollar companies, crypto
investors and the very venture capital firms that triggered the bank run
on S.V.B. in the first place -- all in the name of preventing further
contagion.
Regulators have said that banks, rather than taxpayers, will bear the cost
of the federal backstop required to protect deposits. We’ll see if that’s
true. But it’s no wonder the American people are skeptical of a system
that holds millions of struggling student loan borrowers in limbo but
steps in overnight to ensure that billion-dollar crypto firms won’t lose a
dime in deposits.
These threats never should have been allowed to materialize. We must act
to prevent them from occurring again.
First, Congress, the White House, and banking regulators should reverse
the dangerous bank deregulation of the Trump era. Repealing the 2018
legislation that weakened the rules for banks like S.V.B. must be an
immediate priority for Congress. Similarly, Mr. Powell’s disastrous
“tailoring” of these rules has put our economy at risk, and it needs to
end -- now.
Bank regulators must also take a careful look under the hood at our
financial institutions to see where other dangers may be lurking. Elected
officials, including the Senate Republicans who, just days before S.V.B.’s
collapse, pressed Mr. Powell to stave off higher capital standards, must
now demand stronger -- not weaker -- oversight.
Second, regulators should reform deposit insurance so that both during
this crisis and in the future, businesses that are trying to make payroll
and otherwise conduct ordinary financial transactions are fully covered --
while ensuring the cost of protecting outsized depositors is borne by
those financial institutions that pose the greatest risk. Never again
should large companies with billions in unsecured deposits expect, or
receive, free support from the government.
Finally, if we are to deter this kind of risky behavior from happening
again, it’s critical that those responsible not be rewarded. S.V.B. and
Signature shareholders will be wiped out, but their executives must also
be held accountable. Mr. Becker of S.V.B. took home $9.9 million in
compensation last year, including a $1.5 million bonus for boosting bank
profitability -- and its riskiness. Joseph DePaolo of Signature got $8.6
million. We should claw all of that back, along with bonuses for other
executives at these banks. Where needed, Congress should empower
regulators to recover pay and bonuses. Prosecutors and regulators should
investigate whether any executives engaged in insider trading or broke
other civil or criminal laws.
These bank failures were entirely avoidable if Congress and the Fed had
done their jobs and kept strong banking regulations in place since 2018.
S.V.B. and Signature are gone, and now Washington must act quickly to
prevent the next crisis.
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Please share [ [link removed] ]Warren's op-ed on Facebook and [ [link removed] ]share it on Twitter.
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