Financial Deregulation: Thanks, Trump

On banking regulation, from Forbes:

Thanks to Trump and his supporters this [Dodd-Frank capital and liquidity measures] all changed. Some of the key changes that EGRRCPA made were:

  • Increasing the asset threshold for “systemically important financial institutions” or, “SIFIs,” from $50 billion to $250 billion.
  • Immediately exempting bank holding companies with less than $100 billion in assets from enhanced prudential standards imposed on SIFIs under Section 165 of the Dodd-Frank Act (including but not limited to resolution planning and enhanced liquidity and risk management requirements)
  • Exempting bank holding companies with between $100 billion and $250 billion in assets from the enhanced prudential standards.
  • Limiting stress testing conducted by the Federal Reserve to banks and bank holding companies with $100 billion or more in assets.



36 thoughts on “Financial Deregulation: Thanks, Trump

    1. Macroduck

      Speaking of focusing on what’s important, a Republican-controlled Congress gutted Dodd-Frank. Republicans have been focused on limiting voting rights and reproductive rights and speech rights while Democrats work on solving problems and on governance. With SVB and the contagion risk it was able to generate in an under-regulated banking sector, we have a glaring example of what’s wrong with Republican governance – there isn’t any.

      1. Ivan

        Exactly. They know the hand that is feeding them, so they know what to do whenever they get into power. Cut regulation and taxes on the rich and cut benefits to the poor.

  1. pgl

    ‘Increasing the asset threshold for “systemically important financial institutions” or, “SIFIs,” from $50 billion to $250 billion.’

    Well in Trump World $250 billion is petty cash!

    1. baffling

      as my dad used to observe, democrats get elected to come in and clean up the mess of the previous republican administration. Obama had to clean up after bush. Biden had to clean up after trump. each of them had to clean up a significant republican disaster. which costs money.

  2. pgl

    Wow – I just watched a clip of Tucker Carlson sneering at SVB for promoting …. WOMEN. I guess Tucker thinks the good old boys would have managed this bank better.

  3. Moses Herzog

    It’s not a problem right now, but the odds are very high that it will become one. It’s like a countdown really. But not quite as fun as watching a NASA countdown on YT. Great link and great highlighting of a problem that needs to be highlighted.

  4. w

    It will be interesting, when it all shakes out, to speculate whether any bank could withstand a run on approximately 20 percent of it’s total assets in a day or two. (If true. The numbers I have seen are around $40 B demand against between &175 B and $200 B in deposits.)
    Particularly so in an environment where bonds and treasuries literally decline in value beginning the day they are purchased.
    Another exacerbating factor seems to be instant communication via things like Twitter combined with the ability to electronically withdraw. Reforms, when inevitably discussed by politicians, might do well to address these new realities as much as traditional standards for reserves and liquidity.

    1. Baffling

      Bank runs are easier to occur when you have online transfers and twitter. The bank rules were not devyto deal with modern technology and rates of change. This needs fixing.

    2. Macroduck

      The first stop for any bank needing cash is the repo desk at another bank. Anybody who has been doing $2 billion every once in a while, either direction, who shows up with $15 billion in off-the-run Treasury notes looking for 3-day money is immediately suspect –

      “Fifteen? I’ll call you back…”

      “Hey Charlie, you hearing anything about SVB?…”

      “Hey, SVB, look, I’m gonna need extra collateral. You’re name is on the watch sheet..I just put it there.”

  5. Gloria Mundi (Sic Transit)

    If you have a 1978 style Dollar Crisis right now it will be one of Economic History’s greatest Checkmates….

  6. CoRev

    Trump? Why not Biden’s Financial Stability Oversight Council (FSOC)? Whose job it is a/the Government committee to stop bank collapses:
    Monitor Threats to Financial Stability
    Facilitate Regulatory Coordination
    Facilitate Information Sharing
    Recommend Heightened Standards

    Were they actually tracking financial issues? The council last met on February 10 via videoconference. The readout of that meeting shows the group previewed its 2023 priorities, which included “climate-related financial risks, nonbank financial intermediation, Treasury market resilience, and risks related to digital assets.”

    1. pgl

      I see – it was attention to climate change. Oh wait – your boy Tucker Carlson blamed the woke agenda of letting chicks have better jobs. Any more silliness from the peanut gallery?

    2. pgl

      CoRev trusts this Fox Business headline?

      ‘Silicon Valley Bank had more red flags than a CCP meeting but regulators cared about climate not bank risks’

      I read this rightwing story and even it had to admit that bank risks were discussed. Yea CoRev was feeling left out of the discussion so he had to chime in with the dumbest headline ever written.

    3. baffling

      actually, the fed acted appropriately. its job is not to save the bankers, per se, but to protect the banking sector. eliminate contagion. job done right with respect to svb. or do you believe the job was to protect the management and shareholders of the bank?

      “climate-related financial risks, nonbank financial intermediation, Treasury market resilience, and risks related to digital assets.”
      all important issues facing banks in the near and long term.

      1. CoRev

        Baffled, “all important issues facing banks in the near and long term.” Really? Ignoring the short term issues while focusing on long term and non-core issues is exactly why SVB failed.

        How blindly ignorant.

        1. pgl

          Such an insightful reply – not. Hey CoRev – there are a couple of dark skinned people in your neighborhood so go get your assault weapon.

        2. baffling

          “Ignoring the short term issues while focusing on long term and non-core issues is exactly why SVB failed.”
          svb was very well aware of the short term issues. they simply navigated it incorrectly. you can’t fix stooopid, as corev has so clearly demonstrated on this blog over and over again.
          this tucker carlson change of blame game is boring. corev, you do understand Carlson counts on the stooopidity of his viewers to spin these messages, don’t you? or are you blind to how much tucker actually despises his audience? that means you, idiot.

  7. Anonymous

    it was 15 years of loose money and the sudden blockage from inflation and quantitative tightening. and the greedy without risk managers.

    fiduciary responsibility and due diligence are established by federal banking regulation!!! not!

    management that works for the regulator rather than the shareholder is a bad model. shareholders are out of luck in all these banks!

    we are seeing duration risks playing out. holding long treasuries is dangerous when the fed is tightening…. this is why 2s10 spread has been worrisome for the past 6 months.

    and in case of svb with ~ 40% assets in mbs and agencies (duration risk full up). we see a bank that held a lot of its assets in instruments of their big depositors. svb was damaged by a confluence of agency/mbs duration risk, declining value of its silicon valley founder debt/bonds and general lack of underlying profit in esg assets.

    and all their big asset originators needed cash for working capital!

    dodd frank and gaap allow banks to put treasuries into a ‘not for sale’ account where the asset price is par. that accounting “trick” should end! this is okay unless there is a run on the bank, and ‘not for sale’ must be cashed out aka liquidated..

    1. w

      If not for ‘mark to maturity’ why would any bank buy treasuries at all in a rising interest rate environment? They are instantly guaranteed to be underwater.

      1. baffling

        exactly. even short duration (one month) creates a problem if it matures in 28 days, and the depositor wants their cash today. as I said, it is bothersome that holding treasuries should lead to svb outcomes.

  8. Bruce Hall

    So, looking at a bank (which I won’t identify).

    Total assets
    Total liabilities
    Total deposits
    Total equity capital

    Solid or not? Not enough info?

    Not an SIFI, but national in scope.

    1. pgl

      Brucie cites the book value of some bank he cannot name? Seriously dude – it’s financial are likely public unless you just typed in these numbers with the help of a retard monkey. BTW market values are likely lower than book values so anyone with a brain (which excludes Brucie boy) would worry that this bank is thinly capitalized.

      What Brucie – you do not know what they means? Then ask your retarded monkey.

    2. King John's Return

      USAA bank is probably safe, but there’s not enough info there to determine. You’d need to know more details on the asset side. Is it loans or treasuries or MBS’s? How many of those loans are mortgages vs. commercial vs. retail? If commercial, how much concentration in one particular industry and what’s the credit quality of the loans?

  9. H B

    Which of the rules that were curtailed for smaller banks do you think would have prevented the collapse of SVB? SVB was still required to conduct liquidity stress tests. They were not subject to the liquidity coverage ratio, but would have exceeded the minimum anyway given the size of their “liquid” portfolio as defined by liquidity regulations. None of the rules that were tailored would have made a difference.

    1. Moses Herzog

      The thought that immediately enters my mind is the ratio of long-term debt instruments to short-term debt instruments carried on the balance sheet. Also a max ratio of counterparties belonging to one industry. You can always get bankers, lawyers, and the politicians they bribe to argue any type of rule/regulation, but in reality none of those would be difficult to supervise, administer, or enforce. I’m half tempted to write a letter to Bernie and Elizabeth Warren to start burning the midnight oil on such legislation right now. It certainly makes more sense than making false reasons to go after Disney.

  10. Jacob

    I can only say, it was a bi-partisan effort. My own Democratic senators Mark Warner and Tim Kaine co-sponsored, and it passed by a wider margin that the Democratic Republican split in the House and Senate. Only 31 Democratic senators voted nay; about 16 voted yay and one abstained.

    05/24/2018 Became Public Law No: 115-174.
    05/24/2018 Signed by President.
    05/24/2018 Presented to President.
    05/22/2018 Passed/agreed to in House: On passage Passed by the Yeas and Nays: 258 – 159 (Roll no. 216).(text: CR H4320-4340)
    03/14/2018 Passed/agreed to in Senate: Passed Senate with an amendment by Yea-Nay Vote. 67 – 31. Record Vote Number: 54.
    12/18/2017 Committee on Banking, Housing, and Urban Affairs. Reported by Senator Crapo with amendments. Without written report.
    11/16/2017 Introduced in Senate

  11. Manfred

    Menzie always decries his critics when they do not give context. What Menzie does not tell you is that he does it himself. He does not give context when it serves his political purposes (especially when it comes to his TDS). Which makes Menzie a propagandist, not an actual econ prof.
    At any rate.
    As for the “rollback” of Trump – that rollback was passed by Congress in 2018, and 33 Democrats voted for it in the House, and 16 Democrats voted for it in the Senate.
    Thus, it was not “Trump’s” rollback, it was fairly bipartisan.
    In addition, Menzie does not explain *why* this rollback came about – and as mentioned, a fair number of Democrats supported.
    For a small explainer, see today’s WSJ editorial.
    Finally, Menzie, as usual, does not mention what Barney Frank (yes, the guy from “Dodd-Frank”) said:
    Here is what he (Barney) said: “I don’t think that had any effect,” Mr. Frank told Bloomberg. “I don’t think there was any laxity on the part of regulators in regulating the banks in that category, from $50 billion to $250 billion.”
    [Quote via the WSJ today.]
    But whatever. You can dress a propagandist as an econ prof (with elite degrees), but he or she is still a propagandist.

    1. pgl

      The fact that 16 Democratic Senators made a terrible vote does not absolve your Lord and Master (Trump). Our host has a list of “economists” who thought this roll back was a good thing and it is a very short list of basically right wing lunatics.

      Now people who actually get the economics of banking – there is almost universal consensus that these roll backs were a disaster waiting to happen. Now if you understood basic economics, you would get the simple points being made. Of course THE MANFRED never does basic economics.

      So my apologies for cutting in on your usual stupid troll parade. Please proceed with more of your heated stupidity.

    2. pgl

      The MANFRED cites something Barney Franks said in the WSJ? Hey MANFRED – why did you not tell us about this little WSJ title?

      Barney Frank Pushed to Ease Financial Regulations After Joining Signature Bank Board

      Yea – conflicts of interest never exist in MANFRED’s little world.

    3. pgl

      Hey MANFRED. Are you Speaker McCarthy’s economic advisor? After all the Speaker is saying the SVB mess was not due to a lack of regulation. Oh no – it was all due to Biden and his socialist policies. Yea Kevin says the dumbest things but if he is getting this garbage from you – then come on MANFRED take credit for your nonsense.


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