Sen. Mike Rounds (R-SD) suggested that the controversial 2018 rollback of Dodd-Frank regulations was not responsible for the demise of Silicon Valley Bank.
Rounds, who sits on the Committee on Banking, Housing, and Urban Affairs, argued that, at most, the regulatory regime would have compelled SVB to purchase more of the long-term treasuries that ultimately spelled doom for the bank."Even if you would have had the liquidity requirements that would have been there before ... what we did in 2018, this bank would've qualified already," Rounds said on Meet the Press.
Back in 2018, Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act, which increased the Dodd-Frank threshold from $50 billion to $250 billion for banks that were considered"too big to fail." Seventeen Senate Democrats backed the move at the time. The Dodd-Frank Act was a regulatory regime enacted in the aftermath of the 2008 financial crisis.
Some, such as Sen. Elizabeth Warren , have championed legislation to restore the pre-2018 regulatory outlook for banks. This was because the higher interest rates bring on more returns for investors in newer bonds, rendering older bonds less desirable for investors, and prompting those assets to plunge in value. Rounds appeared to imply that the pre-2018 regulatory framework did not account for massive interest rate hikes. Other banks could be in a similar predicament.
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