Barney Frank blames the crypto panic for his bank’s collapse. Elizabeth Warren blames Trump.

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“I don’t think it had an impact,” Frank said in an interview. “They hadn’t stopped looking at the banks.”

But Warren, a fellow Massachusetts Democrat who crafted historic consumer safeguards that ended up in Frank’s banking law in 2010, firmly blames Trump-era changes that eased oversight of some banks. and says Signature is a prime example of spinoffs. Warren argues that if Congress and the Federal Reserve had not rolled back tighter oversight, Silicon Valley Bank and Signature would have been better able to weather financial shocks.

“They should be held to higher capital standards, they should be subject to stress tests and they should be subject to regular monitoring which would detect exactly the type of error made by SVB, errors concerning the failure of risk hedging and errors regarding concentration in a single sector,” Warren said in an interview on Monday.

The rift between Frank and Warren is just a taste of what’s to come as Democrats settle positions on how to respond to the latest banking crisis, which led to a weekend bailout of depositors Silicon Valley Bank and Signature. Some like Warren want Washington to reinstate tougher regulations that were rolled back in 2018. Some Democrats, like Frank, say the 2018 law isn’t the problem. A number of moderate Democrats still in Congress helped draft the 2018 legislation, including those who will be reelected in 2024.

Frank, who has served on Signature’s board since 2015, said his bank was in “good shape” but was hit by a run generated by “the nervousness and beyond the nervousness of SVB and the crypto”. The bank’s digital asset business has made it the “unfortunate victim of the panic that really goes back to FTX,” the cryptocurrency exchange that failed last year.

Frank said other lenders have been having trouble in recent days, with the Federal Home Loan Bank telling Signature when asking for the money on Friday that “they don’t have enough to go around because they’re getting so many requests “.

Frank said Signature, now in the hands of regulators, will likely sell for a price close to what bank executives thought it was worth.

“The FDIC and New York State have looked into it and made their decision,” Frank said. “Honestly, I was surprised. They apparently had a more negative view of our solvency.

A spokesperson for Signature declined to comment on what happened with the bank. New York Governor Kathy Hochul said Monday that federal and state regulators “see that a run on a regional bank could pose a great risk to our stability.”

The 2018 law that relaxed banking regulations moved forward with some encouragement from Frank, who was on the board of Signature at the time. He was a supporter of raising a $50 billion asset threshold in his 2010 law which triggered tougher oversight.

Congress ended up changing the framework so that banks are eligible for greater regulatory scrutiny once they reach $100 billion in assets, then automatically face the toughest regulation at $250 billion. .

Signature was poised to be a major beneficiary of the change, with assets of around $44 billion in 2018. It had $110 billion in assets as of this weekend.

Frank said on Sunday he doesn’t think going from $50 billion to $250 billion “has an impact.”

“I think if it weren’t for FTX and the extreme nervousness about crypto, this wouldn’t have happened – even to SVB or to us,” he said. “And it was not something that could have been anticipated by regulators.”

Warren now singles out Signature — and SVB — as the reason Congress and regulators should roll back any light banking supervision triggered by the 2018 law. Silicon Valley Bank had roughly $209 billion in assets at the time of its bankruptcy. , up from around $57 billion at the end of 2018.

“We can just repeal the law that was passed in 2018,” Warren said. “It was specifically designed to leave the banks in the $50 [billion] at $250 billion are playing a high-stakes game with people’s accounts across the country. These banks should be strictly regulated.

Frank and Warren seem to be converging on one issue – support for greater depositor protection. Federal deposit insurance is capped at $250,000, but the Biden administration and regulators have essentially pledged to insure all deposits at failing banks.

Warren said in a New York Times op-ed that regulators should reform deposit insurance so that during this crisis and in the future “businesses trying to do payroll and otherwise conduct ordinary financial transactions are fully covered – while ensuring the cost of protecting oversized corporate depositors is borne by the financial institutions that pose the greatest risk.

“I heard people over the weekend talking about what it would mean if they couldn’t make payroll on Monday,” Warren said in the interview. “And I reminded each of them that regulation is your friend.”

Frank said he felt vindicated by the government’s decision to guarantee all deposits because when he served in the House he wanted to pass legislation that would expand deposit insurance, especially for businesses.

He wants Congress to revive that idea and consider what is a reasonable amount to help cover salaries — in his view, tens of millions of dollars.

If the government had announced its safety net on Friday, “we wouldn’t have had the problem”.

Burgess Everett contributed to this report.

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