I wish I’d been wrong.

Five years ago, I warned that deregulating banks would have dangerous consequences. And in the past few days, we’ve seen those consequences of a deregulated system unfold with the failures of Silicon Valley Bank and Signature Bank.

In other words the banks are reaping what they sowed.

Let’s back up a little, and talk about how we got here:

After Wall Street crashed our economy and destroyed millions of livelihoods in the 2008 financial crisis, Congress passed the Dodd-Frank Act to strengthen protections for consumers and make sure that history wouldn’t repeat itself. Wall Street executives and their lobbyists weren’t happy with it (no surprise), and they’ve been trying to chip away at it ever since.

In 2018, high-powered bank executives were calling on Congress to weaken Dodd-Frank so their banks could slip out of those stronger oversight rules. One of those executives? Greg Becker. The CEO of Silicon Valley Bank (SVB).

I raised the alarm and fought hard against these changes, but the banks won that battle. Donald Trump signed a bill into law that rolled back key parts of Dodd-Frank. Regulators, including Fed Chair Jerome Powell, took the situation from bad to worse by letting financial institutions load up on more and more risk with less and less oversight.

The collapses of SVB and Signature Bank are direct results of a toxic mix of risky management and weak supervision.

• SVB relied on a concentrated group of tech companies with big deposits. With such high concentration in a single sector of the economy, any weakness in that sector could undermine the bank’s stability.
• Instead of managing that risk, SVB funneled their clients’ deposits into long-term bonds, making it hard for the bank to respond quickly to changing circumstances. This model was great for short-term profits, which shot up by nearly 40 ‌percent over the last three years‌ — but now we know its cost.
• When things were looking especially bad last week, more of SVB's customers withdrew their deposits — causing a mad dash and, ultimately, a collapse that left many businesses alarmed that they wouldn’t be able to pay their bills and employees (but as the collapse unfolded, SVB executives rushed to pay out congratulatory bonuses).

If Congress and the Federal Reserve hadn’t rolled back parts of Dodd-Frank, these banks would have been subject to stronger requirements to withstand financial shocks. And they would have been required to conduct regular stress tests to expose their vulnerabilities.

But here we are. And last night, regulators announced that all vaporized deposits would be repaid in full. Even for billion-dollar companies, crypto investors, and the very venture capital firms that triggered the SVB bank run in the first place.

(I can’t help but point out that 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.)

Washington must act quickly to prevent another crisis. Here’s what I’m calling for:

1. Reverse the dangerous bank deregulation of the Trump era. Congress must repeal the 2018 law right away. And bank regulators must ensure stronger oversight, taking a careful look under the hood at our financial institutions to see where other dangers might be lurking.
2. Reform deposit insurance. Large companies with billions in unsecured deposits should never again expect, or receive, free support from the government. Regulators should act so businesses affected by bank failures like these are fully covered when they’re trying to make payroll and do other ordinary financial transactions. And the financial institutions that pose the greatest risk should pay for it.
3. Deter this risky behavior by making sure it’s not rewarded. Executives at SVB and Signature — who made millions of dollars — need to be held accountable. That includes clawing back their bonuses. And it also means investigating whether they engaged in insider trading or any other unlawful activity.

This was completely avoidable. I’ll keep advocating strong banking regulations — just like I have for years — and I will work to keep banks like SVB from doing even more damage. And I’m grateful that you’re in this movement alongside me. You make it possible to keep up the fight.

Thanks for being a part of this,

Elizabeth