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Warner, Kaine defend votes to deregulate midsize banks in wake of SVB collapse

Mark Warner gesturing and speaking
Crixell Matthews
VPM News
Virginia Sen. Mark Warner helped write the 2008 Dodd-Frank Act.

Virginia senators’ stance puts them at odds with some fellow Democrats, who say the 2018 law weakened oversight of financial institutions.

U.S. Senators Mark Warner and Tim Kaine defended their 2018 vote in favor of deregulating midsize banks this week as some fellow Democrats blamed that law for the collapse of Silicon Valley Bank and Signature Bank last week.

Warner, a member of the Senate’s banking committee, was part of the bipartisan effort in 2018 to loosen oversight of banks with between $50 billion and $250 billion in assets in a partial repeal of the 2010 Dodd-Frank Act.

Speaking to ABC’s This Week on Sunday, Warner argued SVB’s leadership didn’t appropriately manage their risks and said the bank’s collapse didn’t change his support for the law he helped write.

“I think it put in place an appropriate level of regulation on midsize banks,” Warner said, noting he was also one of the “key authors” of the Dodd-Frank Act that tightened banking regulations.

Like Warner, Kaine co-sponsored the 2018 bill and was one of 16 Senate Democrats to vote for it. In a Wednesday interview with VPM News, Kaine said the bill “was in the right direction.”

Kaine said Dodd-Frank, while necessary to curb the behavior of banks that played a role in the 2008 financial crisis, “was having an unintended consequence of making it harder for smaller community and regional banks to thrive.”

“I voted for it because my community banks had been telling me about Dodd-Frank challenges for years, and they strongly believed and still believe that it was the right thing,” Kaine said.

The Democrat, who is up for reelection in 2024, said he’d await the results of a Federal Reserve review of the SVB collapse, due not later than May 1, before deciding which policy actions needed to be taken.

In the House of Representatives, Virginia’s delegation voted along party lines in 2018, with seven Republicans supporting the measure and four Democrats rejecting it.

Warner was a top recipient of contributions from Silicon Valley Bank and its employees in recent election cycles, according to federal election filings. Records obtained by OpenSecrets and the Sunlight Foundation show that CEO Greg Becker hosted a 2016 fundraiser for Warner at his California home.

Rachel Cohen, a spokesperson for the senator, said in an email to VPM News Tuesday that was the only fundraiser Becker hosted for Warner.

Cohen said SVB’s troubles stemmed from bad management and the 2019 rollback by the Federal Reserve of how much in liquid assets banks must hold to cover possible runs.

When the Fed’s board voted to change those rules, on of the board’s governors, Lael Brainard, argued the changes were a mistake, saying they “weaken the safeguards at the core of the system.”

Cohen also pointed to a post from The Bank Policy Institute, an advocacy group for banks, which argued Tuesday that the bank’s downfall “appears to reflect primarily a failure of management and supervision rather than regulation.”

Other experts — and many Democratic politicians — place at least some blame on the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act signed by then-President Donald Trump.

Renita Marcellin, advocacy and legislative director at the advocacy group Americans for Financial Reform, called the partial rollback of the 2008 Dodd-Frank Act “a folly” in a statement.

“These banks would have faced a tougher risk management framework under the original Dodd-Frank law,” Marcellin said. “But bipartisan majorities in Congress weakened the law in 2018, and Trump-appointed regulators took it even further.”

President Joe Biden said Monday that the Trump administration “rolled back some requirements” designed to prevent the collapse and said he’d urge Congress to tighten regulations.

Sen. Elizabeth Warren (D-MA) pointed blame at both Congress and the Federal Reserve in a Monday New York Times op-ed.

“These bank failures were entirely avoidable,” Warren wrote, “if Congress and the Fed had done their jobs and kept strong banking regulations in place since 2018.”

Roberto Oster contributed reporting to this story.

Ben Paviour covers courts and criminal justice for VPM News with a focus on accountability.
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