The first words out of the mouth of Rep. Katie Porter (D-CA) when
I talked to her on Sunday were: “Can you believe we have to talk
about this shit again?” She was referring to a conversation we had
in 2018, when she was still just a financial expert and a
candidate for Congress, about S.2155, which I call the
Crapo bill, a reference to its co-author (Idaho Republican Sen.
Mike Crapo) and its underlying contents. [...]
The most important part of the Crapo bill was Section 401, which
increased by fivefold the threshold for enhanced regulatory
standards, from $50 billion in assets to $250 billion. Silicon
Valley Bank’s CEO, Greg Becker, lobbied explicitly for this
change. It meant that banks under $250 billion would not be
subject to additional stress tests and heightened capital and
liquidity requirements. SVB topped out around $200 billion,
after growing rapidly in the past few years. [...]
So you have depositors that either didn’t know the first thing
about risk management, or were bribed by the bank into neglecting
it. And you have a bank that didn’t have a chief risk officer for
close to a year, that put their entire risk management on
autopilot and got blindsided by interest rate–fueled losses.
“Interest rates do two things, they go up and down. SVB did not
foresee and manage properly that inevitable thing,” Porter said.