U.S. banking regulators have taken extraordinary measures to shore up the financial system, after a run on Silicon Valley Bank in California last week caused its sudden collapse and sparked fears of financial contagion. The Biden administration says all of Silicon Valley Bank’s depositors will have access to their funds today, including uninsured deposits and those exceeding the quarter-million-dollar cap set by the Federal Deposit Insurance Corporation. The FDIC, the Federal Reserve and the Treasury Department have taken similar steps to protect depositors at Signature Bank of New York — a major lender to cryptocurrency companies — after its rapid collapse on Sunday. These are the second- and third-largest bank failures in U.S. history. Cecilia Rouse, chair of the White House Council of Economic Advisers, sought to downplay fears of a wider collapse.
Cecilia Rouse: “Our banking system is in a fundamentally different place than it was, you know, a decade ago, and that the reforms that were put into place back then really provide the kind of resilience that we’d like to see. So we have every faith in our regulators.”
A bill signed by then-President Trump in 2018 rolled back key parts of the Dodd-Frank banking regulations passed after the 2008 financial crisis. Seventeen Senate Democrats and 33 House Democrats sided with Republicans in support of the deregulation, which ended mandates that banks keep more cash and other liquid assets on hand to prevent bank runs. The 2018 law also rolled back “stress tests” that might have exposed weaknesses at SVB and Signature Bank. SVB’s CEO Greg Becker lobbied Congress in 2015 for the rollback of Dodd-Frank. President Biden is addressing this issue in a speech today.