I've been reading about this all week. It's terrible. I feel especially bad for all the people at the end of the line, the workers whose paychecks will be delayed (or who just won't get paid).
There have been a number of articles on how the last Administration's rollback of Dodd Frank may have come into play here. I haven't see anyone comment on that in this thread yet.
"In 2015, SVB President Greg Becker submitted a statement to a Senate panel pushing legislators to exempt more banks — including his own — from new regulations passed in the wake of the 2008 financial crisis. Despite warnings from some senators, Becker’s lobbying effort was ultimately successful."
And their desire to ease restrictions with financial regulatory reform was successful with the last Administration:
"The measure eases restrictions on all but the largest banks. It raises the threshold to $250 billion from $50 billion under which banks are deemed too important to the financial system to fail. Those institutions also would not have to undergo stress tests or submit so-called living wills, both safety valves designed to plan for financial disaster. It eases mortgage loan data reporting requirements for the overwhelming majority of banks. It would add some safeguards for student loan borrowers and also require credit reporting companies to provide free credit monitoring services."
And so
"In 2021, SVB passed the threshold of $100 billion under management, triggering some additional scrutiny as a Category IV bank but remaining exempt from the more frequent and detailed analyses that regulators perform to determine whether banks above $250 billion of assets have sufficient capital to withstand a crisis."
Makes me furious. Another set of serious consequences for individuals and taxpayers thanks to corporate greed and the politicians they own.
And we're not even done dealing with the Norfolk Southern disaster and the financial and environmental fallout from that.
A handful of people can make life hell for millions and then walk away with no punishment whatsoever.
I'm sorry, but our current banking requirements and capital controls are as sophisticated and conservative as the United States has ever seen. There used to be hundreds of bank runs PER YEAR. Also, train derailments are incredibly low compared to what they used to be. Why are you mad? Do intend to live in a world with ZERO risk of anything bad happening of any kind? Boy I sure don't. Because without risk, there can be no return. Return in this case can be considered life as we know it.
Interesting, I'd like to hear more of your take on this. In my research I did not find there were hundreds of bank runs per year in the US (unless you are talking about 1929 and before modern regulations). Of course there was 2008 and last week, where are you seeing 100s of bank runs in the US?
It's not my area of expertise, so I'm interested in learning more. I did some light research. I don't know about the US banking requirements (I'm assuming you mean regulations since that's what I was posting about) being the most conservative it has ever been. It doesn't seem right to compare very different time periods to one another (specifically pre FDIC with post) for a number of reasons. When examining the history it looks like deregulation was followed by some sort of crash or financial crisis. Maybe they are not connected, but here is a timeline I found from Investopedia:
- Pre 1863-1865, The free banking era, characterized as it was by a complete lack of federal control and regulation, ended with the National Banking Act of 1863 (and its later revisions in 1864 and 1865), which aimed to replace the old state banks with nationally chartered ones.
-1913 Federal Reserve Act
-1929 stock market collapse
- 1933, FDR as part of his administration's New Deal. The Glass-Steagall Act created the Federal Deposit Insurance Corporation (FDIC)
(This is where I would start evaluating US regulation, because I see it as the beginning of our current system)
-1980, (deregulation) Congress passed the Depository Institutions Deregulation and Monetary Control Act
-1980-1989, Savings and Loan Crisis
-1994, (deregulation) Restrictions on the opening of bank branches in different states that had been in place since the McFadden Act of 1927 were removed under the Riegle-Neal Interstate Banking and Branching Efficiency Act
-1999, (deregulation) The Gramm-Leach-Bliley Act of 1999 repealed significant aspects of the Glass-Steagall Act as well as the Bank Holding Act of 1956, both of which had served to sever investment banking and insurance services from commercial banking.
2007-2008, financial crisis and bank run
-2010, (regulation) Dodd-Frank Wall Street Reform and Consumer Protection Act
-2018, (deregulation) some of the Dodd-Frank Wall Street Reform and Consumer Protection Act regulations were rolled back
-2021, by executive order, (regulation) on promoting competition in the American economy called for greater scrutiny of bank mergers by the Department of Justice and federal banking regulators.
-2022 SVB bank run
From this timeline, it seems like there has been more de-regulation that regulation in modern times, so it might be sophisticated but I wouldn't characterize that as conservative. I'm sure I'm missing some important items. I'm not saying that loosening Dodd-Frank solely caused the SVB crisis, I don't have enough info to make that claim. But I brought it into this thread for discussion and I am interested in learning more about the topic.
