Instead the regulators offered solutions that bail out even uninsured bank depositors and other banks at unknown costs that Mr. Biden isn't acknowledging.
While most banks have hedged their interest-rate risk and diversified their deposits, SVB and Signature bank did not - yet, President Biden is of course blaming former President Donald Trump for modifying certain rules from the 2010 Dodd-Frank act in the 2018 bipartisan banking law, which raised the threshold to classify financial institutions as 'systemically important' from $50 billion in assets to $250 billion.
In short, the Dodd-Frank legislation was driving more deposits to large banks, while mid-size banks forced to comply with the same regulations were at a disadvantage.
The 2018 law did not excuse mid-sized banks from performing quarterly liquidity stress tests to ensure they could withstand "Adverse market conditions," and "Combined market and idiosyncratic stresses," such as interest-rate shocks.
Mid-sized banks must also maintain a liquidity buffer of "Highly liquid assets" such as Treasurys and MBS. Something deeper afoot?
Biden's blame game aside, crypto VC Nic Carter has some very interesting thoughts on what went down in regards to the shuttering of Signature Bank, calling it a "Colossal scandal."
My conclusion is that politicians like Liz Warren together with regulatory bodies fragilized crypto banks and encouraged runs against them, then used withdrawals as a pretext to close them down.
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