Over the past few days, the banking system has experienced significant turmoil. A wave of panic hit Silicon Valley Bank on Friday as depositors rushed to withdraw their funds after the bank failed to raise enough capital. This resulted in regulators closing the bank, marking it as the second-largest bank failure in the United States since the 2008 financial crisis.
Chaos, Chaos, and More Chaos
Adding to the chaos, regulators also closed down Signature Bank on Sunday, a crypto-friendly bank. However, the US Treasury, Federal Reserve, and Financial Deposit Insurance Corporation issued a joint statement on Sunday, reassuring depositors that they would be fully protected from any financial losses.
On Monday, Massachusetts Senator Elizabeth Warren penned an op-ed in The New York Times, stating that the SVB shutdown was a direct consequence of weakened financial regulations implemented by the Trump administration. She specifically referred to the Dodd Frank Act's provisions that were rolled back, which protected consumers from the actions of large banks.
Senator Warren further noted that on Sunday, regulators announced their intention to repay all deposits at both SVB and Signature Bank, ensuring that depositors, including billion-dollar companies, crypto investors, venture capital firms, small businesses, and non-profits, would be fully reimbursed, all in the interest of halting any further spread of panic.
Senator Elizabeth Warren has expressed skepticism over regulators' recent assurances that banks will bear the cost of federal backstops designed to protect deposits, rather than taxpayers. While she acknowledges that it remains to be seen whether this claim is true, Warren notes that the American people are increasingly wary of a system that holds millions of struggling student loan borrowers in limbo, yet moves quickly to ensure the protection of billion-dollar crypto firms' deposits.
Republican lawmakers have been staunchly opposed to student-debt relief, with some branding it as a “bailout.” As a result, it remains to be seen whether borrowers will receive the relief that they need. Nevertheless, Warren is resolute in her efforts to ensure that big banks cannot evade regulation.
She maintains that these recent bank failures could have been avoided if Congress and the Fed had upheld strong banking regulations since 2018, and that Washington must take swift action to prevent a recurrence of such crises.
For years, Warren has been advocating for stricter oversight over big banks, as well as for measures to protect student loan borrowers. As regulators work to safeguard SVB customers' funds, millions of student debtors are waiting for the Supreme Court to decide whether President Joe Biden's proposal to cancel up to $20,000 in student debt is legal.
With a staggering 45 million Americans collectively holding $1.7 trillion in student debt, they have yet to receive relief at the scale proposed by Biden. Warren and other Democrats believe that this loan forgiveness is vital to help these borrowers recover from the pandemic's financial impact.
This article was produced and syndicated by Wealth of Geeks.