REUTERS/Jonathan Ernst
- Regulators didn't have to close Signature Bank, said Barney Frank, coauthor of the Dodd-Frank Act.
- The former congressman also helped oversee Signature Bank as a member of its board of directors.
- Frank told Bloomberg that the lender could have continued operating.
Former Congressman Barney Frank, the co-author of the Dodd-Frank Act and a board member of Signature Bank, said regulators didn't have to shutter the bank he helped oversee.
In an interview with Bloomberg, Frank maintained that Signature Bank was closed unnecessarily over the weekend.
"I think that if we'd been allowed to open tomorrow, that we could've continued," Frank told Bloomberg on Sunday night.
The crypto-friendly Signature Bank was shut down Sunday, marking the third-largest bank failure in US history, after SVB. Regulators cited its potential for system risk. Like Silicon Valley Bank, it had a huge amount of customer deposits that were not insured by the FDIC.
Frank told the Wall Street Journal that Signature suffered a bank run of billions of dollars on Friday and that customers' concerns over Signature's crypto exposure spiked after SVB's collapse.
That also followed the closure earlier this month of Silvergate Capital, another crypto-friendly bank. But Frank maintained Signature was different.
"We have a solid loan book, we're the biggest lender in New York City under the low-income housing tax credit," he told Bloomberg. "I think the bank could've been a going concern."
In the wake of the 2008 financial crisis, Frank helped push through the Dodd-Frank Act, which entailed a radical overhaul of the bank regulations to prevent similar catastrophes.
Later in 2018, President Donald Trump and Congress pared back some of those measures for regional banks, with Sen. Bernie Sanders on Sunday saying the partial rollback caused the SVB fiasco.
Frank, for his part said he stands by the original regulation he co-authored.
"The vindication of the bill is that nobody is talking about anything like 2008," Frank said. "If the bill hadn't been passed, we'd be seeing a lot more damage these days. We got a lot of the vulnerability out of the system."
Meanwhile, in 2015 Greg Becker, chief executive of Silicon Valley Bank, lobbied for easing regulatory oversight.
"SVB, like our mid-sized bank peers, does not present systemic risks," Becker wrote to the Senate eight years ago.
In any case, Frank said he doesn't blame Trump for the changes he initiated, which lowered the regulatory bar for small- and mid-sized banks, such as Signature Bank as well as Silicon Valley Bank.
"I don't think that had any effect," said Frank, who retired from Congress in 2012. "I don't think there was any laxity on the part of regulators in regulating the banks in that category, from $50 billion to $250 billion."
Meanwhile, President Joe Biden said Monday he will seek stricter oversight on banks.