WASHINGTON — A group of Democrats led by Sen. Elizabeth Warren, D-Mass., and Rep. Katie Porter, D-Calif., will unveil legislation to restore bank regulations that were undone under then-President Donald Trump in 2018, seeking to fix what they say was the cause of Silicon Valley Bank’s collapse.
The legislation, first reported by NBC News, would repeal the centerpiece of a law passed on a bipartisan basis by the Republican-led Congress in 2018, which eased Dodd-Frank financial regulations on midsize banks by raising the “too big to fail” threshold from $50 billion in assets to $250 billion.
“In 2018, I rang the alarm bell about what would happen if Congress rolled back critical Dodd-Frank protections: banks would load up on risk to boost their profits and collapse, threatening our entire economy — and that is precisely what happened,” Warren said. “President Biden called on Congress to strengthen the rules for banks, and I’m proposing legislation to do just that by repealing the core of Trump’s bank law.”
The Warren-Porter bill would restore the threshold established in 2010 for enhanced capital requirements and stress tests in an attempt to prevent future failures like those at SVB and Signature Bank last week.
The legislation will be introduced Tuesday with a raft of original cosponsors, according to Warren’s office — including Sen. Tammy Baldwin, D-Wis., and Sen. Bob Casey, D-Pa., who face re-election in competitive states in 2024; as well as Rep. Pramila Jayapal, D-Wash., the chair of the progressive caucus, and Rep. Ro Khanna, D-Calif., who represents SVB’s district; and Sen. John Fetterman, D-Pa., who serves with Warren on the Senate Banking Committee.
Porter, who is running for the Senate seat held by Sen. Dianne Feinstein, D-Calif., in a crowded race against several prominent House Democrats, said the bill would “restore common-sense guardrails that keep corporate greed in check and restore confidence in our financial system.”
The new bill is likely to reignite divisions between Democrats dating back to the 2018 fight. At the time, Warren pressured senators to block the GOP-led deregulation bill, but 17 Democrats voted with Republicans, giving them enough support to break a filibuster and pass it. Proponents argued that many small and midsize banks were being stifled by the enhanced regulation passed in the wake of the 2008 financial crisis and could operate better without it.
Among the banks impacted by the easing of regulations in the Trump-era measure was Silicon Valley Bank, which joined an array of midsize and community banks lobbying for that relief at the time. The Warren-Porter bill would not repeal the entire 2018 law, but rather the core of it — Title IV, called “Tailoring Regulations for Certain Bank Holding Companies” — that set asset limits for which banks were subject to federal scrutiny.
Some of the Democratic supporters of the 2018 law, including Sen. Mark Warner of Virginia, say it set appropriate levels of regulation on midsize and community banks.
The failure of SVB has reopened the debate over financial regulation. It’s far from clear the Warren-led bill can get the necessary 60 votes to advance in the Senate. And if it does, it would be a tougher sell in the House, which is controlled by Republicans who voted for the deregulation measure in 2018.
Republicans aren’t blaming the bank failure on a lack of regulation: House Speaker Kevin McCarthy, R-Calif., tweeted Tuesday that President Joe Biden’s spending caused “record inflation and rapid interest rate hikes that broke family budgets and banks too.”