Senate Democrats Who Voted For 2018 Bank Deregulations Say They Have No Regrets

Topline

Senate Democrats who voted in favor of 2018 banking deregulations the Biden Administration is attributing to the bank crises are standing by their decisions—representing a division within the party as other members seek to reimplement the law in the wake of Silicon Valley Bank and Signature Bank’s abrupt implosions.

Sen. Michale Bennet (D-Colo.) speaks to reporters outside of the Senate Chambers on March 14, 2023. … [+] (Photo by Anna Moneymaker/Getty Images)

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Key Facts

Sens. Michael Bennet (D-Colo.), Angus King (I-Maine), Jeanne Shaheen (D-N.H.) and Maggie Hassan (D-N.H.) all told Politico they did not regret their decisions to vote alongside Republicans in approving rollbacks to regulations implemented as part of the Dodd-Frank Act passed in the wake of the 2008 banking crisis.

“I voted for a bill that was a bipartisan compromise,” Benet told Politico, while Shaheen blamed SVB’s collapse on “very bad management” that “you can’t fix that with any regulation.”

The four senators were among 16 Democrats who voted with Republicans to pass the 2018 legislation, which freed small- and medium-sized banks such as SVB and Signature from regular stress tests and liquidity and capital standards.

In the wake of SVB’s and Signature’s closures, others in the party, including President Joe Biden, attributed the loosened restrictions to the banks’ failures, while Sen. Elizabeth Warren (D-Mass.) and Rep. Katie Porter (D-Calif.) introduced legislation on Tuesday that would renew the 2010 regulatory requirements for the smaller banks.

Some of the 31 Democratic senators who voted against the repeal in 2018 were not listed among the 17 cosponsors of the new legislation, including Sens. Chuck Schumer (N.Y.), Sherrod Brown (Ohio), Kirsten Gillibrand (N.Y.), Amy Klobuchar (Minn.) and Patty Murray (Wash.), though it’s unlikely those in senior leadership positions (such as Schumer, Brown and Murray), would publicly back the legislation at its early stage.

Chief Critic

Senators who voted alongside Republicans in 2018 are facing criticism from their Democratic colleagues. Senate Majority Whip Dick Durbin (D-Ill.), who opposed the regulatory rollbacks, told Politico that “history” would determine the outcome of those members’ votes. “I was on the right side of it,” he said. Sen. Kyrsten Sinema (I-Ariz.)’s vote in favor of the 2018 repeal has already become an issue in her potential 2024 re-election campaign. Rep. Ruben Gallego (D-Ariz.), who is running for her seat, called her vote the “most salient example of how we’re different,” he tweeted, accusing her of siding with banking lobbyists who pushed for the deregulation.

Key Background

Silicon Valley Bank closed Friday and handed control of its assets to the Federal Deposit Insurance Corporation following a run on deposits experts attributed to a rise in interest rates that hurt the value of the banks’ investments in Treasury bonds and mortgage-backed securities. On Sunday, the FDIC shuttered the New York-based Signature Bank after it also saw a mass withdrawal of deposits in what was largely considered a byproduct of the SVB collapse, though Signature had faced hardships due to its heavy reliance on the struggling cryptocurrency industry. The FDIC has vowed to make all SVB and Signature depositors whole, even if their deposits exceed the $250,000 threshold for FDIC insurance.

Tangent

The 2018 partial repeal of Dodd-Frank, which passed the House with the support of 33 Democrats, raised the threshold for banks to meet certain regulatory requirements from $50 billion in assets to $250 billion, leaving fewer than 10 U.S. financial institutions subject to the restrictions signed into law by former President Barack Obama in 2010. Had the law been kept in place, both Silicon Valley and Signature Banks would have been covered under the old $50 billion cutoff.

What To Watch For

The bill that would repeal the rollbacks is unlikely to pass the GOP-controlled House, where Republicans broadly oppose new financial regulations. The legislation also faces tough odds in the Senate, where Democrats have a two-seat majority, but need support from nine Republicans to avoid a filibuster. Brown, who chairs the Senate banking committee, expressed doubts that it could pass. “We’re going to try,” he told Politico, adding “I don’t know how we do a legislative fix.”

Contra

A clear Republican narrative on who to blame for the bank crises has yet to emerge. Those on the far right, including former Florida Gov. Ron DeSantis and Rep. Marjorie Taylor Greene (Ga.), have blamed “woke” diversity, equity and inclusion policies at SVB, along with its investments in environmental sustainability, though there is no evidence the policies contributed to the bank’s demise. Senior GOP members in Congress, including House Financial Services Committee Chair Patrick McHenry and Sen. Mitt Romney (R-Utah), meanwhile, applauded the FDIC’s intervention in the banking crises, while Republican Study Committee Rep. Kevin Hern (R-Okla.) reportedly “discouraged making up a narrative that isn’t accurate or justifiable” in a members-only call on Monday, Republican sources told multiple outlets. The ties between the federal government’s debt and spending could become a target for the GOP, however. McCarthy alluded to this in an interview with Fox News on Sunday, telling host Maria Bartiromo, “high debt brings inflation and what happens with inflation? You see with this bank—interest rates moving up.”