Two masterminds of the post- 2008 Wall Street regulation system, Rep. Barney Frank and Senator Elizabeth Warren, yet again differ about what is causing banks to fold. While in office, Frank chaired the Committee for House Financial Services just as the global financial crisis hit and he wrote sweeping new rules for the financial sector. He also served as a member on the Board of the New York Signature Bank which was shut down recently.
Frank blames Signature’s fall on the crypto panic that started last year. His bank was one of the privileged few that served the industry. A bipartisan regulatory roll back ascented into law by former president Trump in 2018 was fueled by the desire to even the regulation of mid- sized banks like his own, though it had no impact, Frank argues.
But a fellow Massachusetts democrat, Senator Elizabeth Warren, lays the blame squarely on the former president Trump. Trump’s era eased some bank oversight and Signature Bank is a very good example. She claims that if Congress and Federal Reserve had not rolled back the stricter oversight, Signature and Silicon Valley banks could have withstood the financial shocks.
The gap between the two Democrats is a premonition of what is to come while Democrats align positions on how to tackle the most recent banking crisis that culminated into the bail out of Signature and Silicon Bank depositors over the weekend. Frank said he and other lenders ran into trouble with the federal loans bank at a time Signature was applying for money, and the Federal Loan Bank told Signature Bank that they didn’t have much to go around owing to the too many requests they were getting.
Frank and Warren seem to agree on one issue – their support for bigger depositor protection. The Federal Deposit Cnsurance caps its protection at $25,000 though regulators and the Biden administration pledged to fund all the deposits at the banks that went belly up.
Regulators must reform the deposit insurance in this crisis so that in the future, enterprises seeking to make payroll are fully covered, Frank commented in a New York Times op-ed. Frank is happy that the government has vindicated him through their decision to guarantee deposits because during his tenure as a Republican, he desired to pass the legislation that would expand the deposit insurance specifically for business.
Meanwhile, the wider cryptocurrency industry and its leading actors like Canaan Inc. (NASDAQ: CAN) awaits the formulation of comprehensive regulations which can serve as guideposts to the entities operating in this space.
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