Banking Lobby's Influence on Deregulation Exposed in Collapse of Silicon Valley Bank and Signature Bank

As the Federal Reserve and Congress respond to the collapse of Silicon Valley Bank and Signature Bank, the legacy of a bipartisan rollback of banking regulations in 2018 is coming under scrutiny. The joint effort by Red-state Democrats and Republicans to weaken the 2010 Dodd-Frank law, aimed at preventing a future financial crisis, has been linked to the recent banking turmoil. The industry's potent lobbying campaign, which cost tens of millions of dollars, drew hundreds of lobbyists and secured significant campaign contributions for lawmakers who supported the measure. Critics argue that the deregulation has left banks with inadequate oversight, making them more vulnerable to collapse.

Key Takeaways:

• The 2018 bipartisan coalition, led by Senator Mike Crapo (R-ID) and Democratic Senators Jon Tester (D-MT), Joe Donnelly (D-IN), Heidi Heitkamp (D-ND), and Mark Warner (D-VA), passed a bill that rolled back parts of the Dodd-Frank law, despite criticism from Senators Elizabeth Warren (D-MA) and Sherrod Brown (D-OH).
• The measure, sold as regulatory relief for community banks, included provisions that drastically curtailed oversight once the Trump Fed finished writing new regulations.
• The bill lifted the threshold for banks that faced strict regimen of oversight, including mandatory financial stress testing, effectively carving large mid-size banks out of more stringent regulation.
• Campaign checks totaling $357,953, $302,770, and $265,349 were written to Heitkamp, Tester, and Donnelly, respectively, from the banking industry during the 2018 campaign season, making them the top Senate recipients of money from the banking industry.
• The American Bankers Association paid $125,000 for an ad campaign thanking Tester for his role in the bill's passage.
• Silicon Valley Bank representatives, including CEO Greg Becker, lobbied extensively for deregulation before the bank's collapse.
• Heitkamp, who was the only member of the bipartisan group invited to the bill signing ceremony, acknowledges an open question about whether new rules put in place by the Fed after the measure's passage could have played a role in the bank's collapse.

Statistics:

• The lobbying campaign spent over $400 million in 2017 and 2018 on campaign contributions and lobbying efforts.
• The bill drew a bipartisan coalition of 17 Democratic Senators in its passage.
• The American Bankers Association spent $125,000 for an ad campaign thanking Tester for his role in the bill's passage.
• Silicon Valley Bank lobbyists donated $10,800 to Tester's campaign.
• Heitkamp and Tester received $357,953 and $302,770, respectively, from the banking industry during the 2018 campaign season.

Sources:

• Associated Press analysis of public lobbying disclosures
• OpenSecrets, a nonpartisan group tracking money in politics
• Tester's office schedule posted to his Senate website
• Americans for Financial Reform, a left-leaning financial sector watchdog group
• Senate Banking Committee
• American Bankers Association records
• Independent Community Bankers of America trade group records