After 2 banks collapsed, Sen. Warren blames the loosening of restrictions
Banks across the nation are reassuring their customers that they will not collapse like Silicon Valley Bank and Signature Bank. Senator Elizabeth Warren says Congress and the Federal Reserve are to blame for bank failures.
"Remember after the crash in 2008, we understood that if you don't put pretty strict regulations on these big banks, they'll go out and boost their profits by taking on a lot of risks," Warren told NPR's Leila Fadel early on Tuesday.
"Then in 2018, the Republicans under Donald Trump said, no, we need to loosen those regulations," Warren said. "And they got some help from the Democrats and ultimately passed a bill that rolled back that kind of protection for banks that were bigger than $50 billion but smaller than $250 billion.
"And sure enough, we saw the consequences of that over the weekend," Warren said.
Barney Frank, former congressman and former board member of Signature Bank, told NPR's Juana Summers yesterday that these bank failures did not happen because of the roll back of Dodd-Frank Act but because of crypto.
Warren disagrees and said, "In both cases, it was about loading up on risk in order to boost the profits."
"It's not just Congress. It's also the Fed that stepped in."
The Fed announced a review of SVB supervision and regulation on Monday after its takeover by financial regulators led to the largest bank failure since the 2008 financial crisis.
"Look, for this inquiry to have any credibility, Chair Powell must recuse himself," Warren said. "When the law was weakened, it permitted the Fed to loosen those regulations. Chair Powell led the charge on that. He not only loosened the regulations, he went further than some people thought the law permitted."
"You know, this is part of the reason that I opposed him for his re-nomination to be chair of the Fed. I thought that this was a very dangerous move on his part."
For people who use smaller regional banks, Warren says they should not worry.
"The federal government has stepped in and said we're going to make sure that depositors are protected. And that means everyone should breathe a big sigh of relief over that issue. Now, we need to make changes in the law so this problem doesn't happen again."
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