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New Legislation Aims To Repeal Trump-Era Bank Deregulations

Sen. Elizabeth Warren speaking with attendees at the Clark County Democratic Party's 2020 Kick Off to Caucus Gala at the Tropicana Las Vegas in Las Vegas.

Two Democratic lawmakers have proposed legislation that would repeal part of a banking regulation rollback law enacted in 2018 that loosened bank industry regulations for small and midsized banks.

Sen. Elizabeth Warren of Massachusetts and Rep. Katie Porter of California are backing the Secure Viable Banking Act, which would require banks holding between $50B and $250B in assets to return to the strictest level of oversight mandated by the Dodd-Frank Act of 2010.

Dodd-Frank was passed in the wake of the Great Financial Crisis to prevent another such systemic failure.

Under the proposal, banks with more than $50B in assets would be subject to the stress tests stipulated by Dodd-Frank. The tests are designed to identify weaknesses in financial institutions before they become critical.

A measure passed in 2018 and signed by then-President Donald Trump set the threshold for stress tests at more than $250B. That exempted banks such as Silicon Valley Bank, with assets of about $212B as of the end of 2022, from stricter regulation.

The Warren-Porter bill faces a steep uphill battle in Congress, especially in the Republican-led House of Representatives.

The 2018 rollback passed mostly with Republican support, though some Democrats voted for it as well, allowing it to overcome a filibuster in the Senate. Those lawmakers argued the Dodd-Frank requirements were too onerous for smaller banks.

Democrats who supported the 2018 measure now say SVB's failures wouldn't have been prevented by the Dodd-Frank stress tests, pointing instead to gross mismanagement as the cause of the collapse, The Hill reports.

Separately, Rep. Blaine Luetkemeyer, a Republican from Missouri, has proposed that the government temporarily guarantee all bank deposits, regardless of size.

Luetkemeyer, a former banker and member of the House Financial Services Committee, argued that if depositors at smaller banks worry too much about their deposits, it could cascade into a run on those institutions, further threatening the stability of the financial system.