Former Democratic Rep. Barney Frank of Massachusetts, who helped author landmark consumer protection legislation in the aftermath of the 2008 financial crisis, sits on the board of New York-based Signature Bank, which collapsed over the weekend and will be bailed out by the new Bank Term Funding Program (BTFP), the Biden administration announced on Sunday.
Frank helped author the Dodd-Frank Act, which was enacted in 2010 and was intended to safeguard against future bank crises, but Signature Bank was shut down after suffering a run of billions of dollars on Friday. Frank has served on Signature’s board since June 2015 and as of 2018 he had received over $1 million from the bank, according to Axios.
Dodd-Frank established regulatory protections on banks with over $50 billion in assets, but in 2018, Frank supported a rollback that passed and raised the threshold to $250 billion, according to The Washington Post. Signature Bank at the time had $40 billion in assets so this increased threshold allowed them to expand substantially while avoiding increased regulation.
Signature Bank’s issues were purportedly caused by crypto rather than interest rates, as it became a viable alternative destination after cryptocurrency exchange FTX collapsed, according to Politico. Following the Friday collapse of Silicon Valley Bank (SVB), Frank said Signature was a victim of panic, even stating, “We were fine until the last couple of hours on Friday,” according to The Wall Street Journal. (RELATED: Regulators Shut Down Silicon Valley Bank After Stock Collapses)
The BTFP will ensure that no depositors in SVB or Signature Bank will lose any of their funds and “no losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer,” according to a joint statement by the Federal Reserve, Treasury, and Federal Deposit Insurance Corporation.
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