SIVB: Government Blocked a Sale, Has an Agenda
Mar 14, 2023 17:56:36 GMT
lookingforatenbagger likes this
Post by icemandios on Mar 14, 2023 17:56:36 GMT
'Another Scandal': Biden Admin 'Radicals' Blocked SVB Sale, Nationalized It, Then Blamed Trump For Collapse
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' (Sifi) from $50 billion in assets to $250 billion.
Yet, as the Journal notes, Barney Frank, co-author of Dodd-Frank, thinks that's BS, as the entire point of the 2018 legislation was to reduce costly compliance on mid-size banks so they could be more competitive with the giants - the latter of which benefit from a lower cost of funding due to their implicit government backstop. 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.
Yet, as the Journal notes, Barney Frank, co-author of Dodd-Frank, thinks that's BS, as the entire point of the 2018 legislation was to reduce costly compliance on mid-size banks so they could be more competitive with the giants - the latter of which benefit from a lower cost of funding due to their implicit government backstop. 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.