This former GOP senator once voted to roll back bank regulations. Hear what he thinks now

The US Justice Department and Securities and Exchange Commission are opening investigations into the collapse of Silicon Valley Bank, according to sources familiar with the matter. Meanwhile, Sen. Bernie Sanders (I-VT) argued that the culprit was a 2018 law, signed by then-President Donald Trump, that rolled back regulations on banks of SVB’s size. CNN’s Jake Tapper discusses this with an expert panel. #CNN #News


  1. Jake: Wouldn’t the stress test have caught the problem of investing too much in treasury bonds in a high-interest rate environment?
    Toomey: “The duration mismatch they had would have been obvious on many levels without requiring the stress test. The point is the stress test is usually designed to measure what happens under various stresses and I’m saying there’s no stress test that’s designed to measure the results of something anywhere near as severe and radical and immediate as what SVB underwent.” The mismatch would have been obvious to whom? Obviously not to the right people. The stress test would have made it clear to federal regulators.

    1. I think I get what he’s saying. What happened at SVB exceeded the parameters of any stress tests. However, the “duration risk” shoukd have been considered.

  2. So, the government makes it easier for banks to get money, the banks mismanage that money and Toomey blames the government for the consequences. Makes sense.

    1. When you have a company with 1000’s of employees, you need a large account to meet payroll. When you have to pay Apple for the 10,000 iPhones you are going distribute to your 1000 stores across the country, you need a large bank account. $250,000 is OK for a person, it is pretty small for a large business.

      There are lots of reasons businesses need large deposits to conduct day to day business. These uninsured business accounts are what caused the bank run.

    2. ​@Andrew Logan sorry, it was the surge in interest rates. Banks have computer programs that spit out what kind of risk they can expect of certain things occur. Like inflation

      I’m betting wenhave been in such a low interest rate realm for so long, the computer programs basically ignored the interest rates.

  3. There are Rules and Regulations in place for Reasons, those who fight to change things are usually not benefiting by these Rules and Regulations, so when Politicians get together to change things or make things easier, put on your Seatbelt, going for a Ride!

    1. Yep. Of course expect squabbling & bickering in Congress over this mess with little to nothing getting done about it.
      Apparently that is what we put them in office to do.
      Any “regulations that will be put in place” will not prevent another collaspe or financial market crisis.
      It can easily implode due to these 3 himan emotions and attitudes.
      One: irresponsibilty
      Two: fear
      Three: GREED

  4. you want to stop inflation… inact the windfall profits tax…. so when companies price gouge as they did through the pandemic they pay a price…. they doubled prices again and again because they could not because they needed too

    1. @morganstevens3211 
      IDK how you got to gender from this conversation. But you are completely wrong again. I’m not confused about my gender at all. I was born male, and I am quite comfortable with that. Luckily, I haven’t had to struggle over gender issues. But I support those who HAVE had to deal with uncertainty over who they are and those who have figured out that they don’t feel comfortable with their birth gender.

  5. The Inconvenient Truth. ⚔
    Reaganomics neoliberalism is contemporarily used to refer to market-oriented reform policies such as “eliminating price controls, deregulating capital markets, lowering trade barriers” and reducing, especially through privatization and austerity, state influence in the economy & leaving the door wide open for possible racketeering. ⚔

  6. Usually, takes 7 years after bank deregulation for a major crisis.
    This time, it only took 5 years.
    – S&L crisis
    – 2007-08 mortgage mess (stuff starting getting screwed in ‘06)

  7. Management is at fault, knowing there was a problem. Did anyone do anything about it? The bank boss cashed in his $3.6 million two weeks before the crash.

    1. No. I used to work in this field. Preparing loans from a bank to be used in stress tests.

      It’s like taking your car to the mechanic to check the oil.

      The stress tests tell you if the bank is in danger based on the economy, things like inflation.

  8. Yeah, yeah, yeah. Are you telling me that Toomey did not line his pockets with gold to advocate bank deregulation? These people know how dangerous deregulating banks is, yet still do it for personal wealth and come out with a load of word salad.

    1. This is pretty cynical – reasonable people can disagree on the finer points of how regulation is applied to banks. The largest banks, who’s failure would lead to major problems for the economy and require a bailout, need very rigorous regulation while the smallest banks, who’s failure wouldn’t impact the broader economy (and who likely could ill afford tracking to the same standards), should have some more finely tailored banking regulations. Maybe the regulation on SVB was inadequate and the government made a mistake or maybe their poor management was to blame (or, most likely, it was a combination of both)

      Toomey gave up a Senate seat he probably would have retained and voted to convict the president from his own party. We don’t really know any of these folks but I’d say he seemed like one of the more principled Senators we had. I feel like the Senate is a worse place without him.

  9. One of the required stress test scenarios was what happens when interest rates rise rapidly. The Don the Con/Toomey rollback exempted SVB from applying those tests.

  10. We’re not paying more for goods and services because of inflation. We’re paying more because corporations are charging more because of inflation.

    1. Corporations are a big part of the reason we have inflation. Not the only factor, but definitely one of them.

    2. “We don’t have inflation because of inflation, we inflation because of inflation” -Catherine Williams
      I think we’ve found the perfect running mate for Biden in 2024.

  11. Thank you to him for his explanation. People need to hear it. But if SVB exceeded the liquidity coverage ratio, how did they have such troubles? – Unless they were just way overinvested in that one thing? How could they have not seen it? A fundamental rule of investing is you don’t put all your eggs in one basket. Why wasn’t the duration risk caught?
    Good interview.

    1. @Unconventional Ideas Mismanagement may only be the tip of the iceberg. Still difficult to understand how they couldn’t have caught it.

  12. As a former CEO, it is complete mismanagement that SVB failed. It shows up poor regulations and a regulator who was not on top of how SVB was (mis)managing its liquidity and interest rate risk. It’s insane that management did not have more of its funds locked up in fixed terms, even if only for 7 and 30 days.

    1. Regulators don’t sit in the bank, examinations look at performance over time, this bank crash started on Twitter where hundreds, then thousand make an electronic run on the bank’s liquidity, there is no stress test for such a run. This situation would not have shown up on a “Call Report” for FDIC, the problem is with the bank’s compliance officer allowing concentrations in fixed term/interest securities. FDIC response was excellent! Dodd-Frank should not have been undressed.

    2. As a past federal bank examiner and mortgage lender, regulation nor oversight caused this train wreck.

    3. @duckmusic Of an Australian credit union. Hence why I know how to manage the liquidity and interest rate risk.

    4. @Bill Sias I don’t know about the US, but as the CEO of an Australian credit union, I had to send information monthly to our regulator and would have to meet with them. They were across what performance. If they had concerns about financial institutions, oversight would increase and if necessary, would require they merge with a stronger financial institution. What the tweets did was expose SVB poorly managed their liquidity and interest rate risk.

      Unlike the US, Australian regulators and policymakers learnt from the mistakes of the 1980’s. We haven’t diluted regulations. Our politicians and banks haven’t called for regulations to be reduced. It’s why Australia has not had a regulated financial institution fail since and why Australia didn’t have a recession from 1993 until Covid. Even then, we bounced back quickly.

    5. @Andrew Mason Actually, we do much of the same thing and the report is the “Call Report” I mentioned. Congratulations. That must be the reason we are more profitable and all deposits are federally insured, no real loss.

  13. Rolling back ANY regulations on the financial industry, which is rife with greed, and corruption, is a problem for the over whelming majority of society. Toomey is still cheerleading for SVB, the financial industry, and his part of the dismantling of regulations, mainly out of his own pride and greed.

  14. If there is wrong doing in this event you can be confident that nobody will get punished for it in the US

  15. The PROBLEM was high interest rates gummed up the works.

    If the fed had been running quarterly stress tests in SVBs Loans, this should have been flagged as risky.

    It’s really no different than taking your car to the mechanic to check out the oil. Maybe nothing is wrong at the moment but the mechanic can warn you about issues down the line.

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