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A group of mid-size banks spent nearly $50 million on a lobbying blitz supporting 2018 legislation that eliminated oversight rules experts now say could have prevented the recent collapse of one its members, Silicon Valley Bank, or SVB.
That legislation, which received bipartisan support in Congress, eliminated key reforms instituted by the Dodd-Frank Act in 2010 for banks with between $50 billion and $250 billion in assets — regulations developed after the last major financial crisis. The two-dozen mid-size banks that stood to benefit from the 2018 bill spent $46 million lobbying lawmakers and executive branch agencies over a key 18-month period while the legislation was being discussed and implemented, a Grid analysis has found.
The banks’ lobbying efforts were accompanied by a flood of campaign cash to key federal lawmakers. Members of the Senate Banking Committee received $2.4 million in campaign contributions from the commercial banking industry during the 2018 campaign cycle.
It paid off: The bill was a rare bipartisan success. The Senate passed it with a 67-31 vote in March 2018, and the House followed, voting 258-159 in May, before then-President Donald Trump signed it into law. Sen. Mike Crapo (R-Idaho), the then-chair of the Senate Banking Committee, said at the time that “relief from enhanced prudential standards” for banks with less than $100 billion in assets was “a key provision of the bill.”
“The primary purpose of the bill is to make targeted changes to simplify and improve the regulatory regime for community banks, credit unions, midsize banks and regional banks to promote economic growth,” Crapo said in 2018.
Five years later, however, critics have blamed those weakened standards for a pair of bank failures that put the U.S. financial system on the brink of systemic failure. The exact causes of Silicon Valley Bank’s failure are still being debated — and will likely be investigated in the coming months. But critics of the 2018 law argue that it helped set the stage for the current crisis by removing the stricter regulatory oversight that SVB would have been subject to under the 2008 law. And they’re placing the blame squarely on the bank lobby.
