The second and third largest bank collapses in U.S. history — coming in rapid succession — are prompting a reckoning within Congress about the state of the U.S. financial system.
Why it matters: The vast majority of members of Congress came into office after the 2008 financial crisis. For them, this is relatively uncharted territory.
- With the federal regulators stepping in to protect depositors of Silicon Valley Bank and Signature Bank, lawmakers are weighing long-term steps to avert similar collapses.
- On a bipartisan, bicameral call with Treasury officials on Sunday night, several lawmakers called to pass new laws to ensure long-term stability.
What they're saying: House Democrats from the states most affected by the bank collapses, in interviews with Axios, floated large-scale financial reforms and hearings.
- Rep. Josh Harder (D-Calif.) laid out three next steps for Congress: monitoring the next 24 hours to ensure the reopening of the two banks goes off "smoothly," launching investigations and passing new legislation.
- "I really don't see an avenue where there is not some sort of central legislation to deal with the after-impacts of this, even if it's just to really cement what happened this weekend," he added.
- Both Harder and Rep. Jake Auchincloss (D-Mass.) called for congressional hearings, with Harder also floating a special investigator.
The state of play: The Senate doesn’t return to session until Tuesday and the House is out on recess all week.
- The House’s plans to stay out of session are not expected to change, House Majority Leader Steve Scalise’s (R-La.) office told Axios.
- That has left House members to organize briefings, send letters, issue statements – and cross their fingers for a smooth landing.
Zoom in: Many Democrats are pointing to the rollback of some Dodd Frank banking rules in 2018 as the culprit.
- "We need to put back in place protections Republicans and big banks gutted in 2018 once the immediate crisis is contained," Rep. Adam Schiff (D-Calif.) told Axios in a statement.
- Rep. Ayanna Pressley (D-Mass.) called for a hearing to investigate "how Republicans’ 2018 bank deregulation bill contributed to SVB’s risky behavior and jeopardized financial stability for far too many.”
Reality check: While the idea of hearings could gain bipartisan backing, new regulatory safeguards are a long-shot given GOP control of the House.
- "Building a culture of government intervention does nothing to stop future institutions from relying on the government to swoop in after taking excessive risks," said Sen. Tim Scott (R-S.C.), the ranking member on the Senate Banking Committee, in a statement.
- House Financial Services Chair Patrick McHenry (R-N.C.) echoed Scott: “I have confidence in our financial regulators and the protections already in place to ensure the safety and soundness of our financial system.”
