Biden blames bank failures on Trump signing 2018 bill passed with significant Democrat support

President Biden and Democrats including Massachusetts Sen. Elizabeth Warren are blaming former President Trump for the recent failure of two banks, citing legislation he signed in 2018 — even though that measure passed with significant Democrat support in both the House and Senate.

The Economic Growth, Regulatory Relief, and Consumer Protection Act received 33 votes from House Democrats and 17 votes from Democrats in the Senate, including one independent, Maine Sen. Angus King, who caucuses with the Democrats. 

Many small-to-medium sized banks and credit unions were frustrated by certain regulations under the 2010 Dodd-Frank Wall Street reform bill. The 2018 bill that Trump signed "amends the Truth in Lending Act (TILA) to allow a depository institution or credit union with assets below a specified threshold to forgo certain ability-to-pay requirements regarding residential mortgage loans," according to the text of the legislation.

Under the law, "those requirements are waived if a loan: (1) is originated by and retained by the institution, (2) complies with requirements regarding prepayment penalties and points and fees, and (3) does not have negative amortization or interest-only terms." In addition to those waiver conditions, "the institution must consider and verify the debt, income, and financial resources of the consumer."

President Biden credited the Obama administration for putting in place "tough requirements on banks like Silicon Valley Bank and Signature Bank, including the Dodd-Frank Law, to make sure the crisis we saw in 2008 would not happen again" in the future. 

"Unfortunately, the last administration rolled back some of these requirements," Biden said on Monday. "I'm going to ask Congress and the banking regulators to strengthen the rules for banks to make it less likely that this kind of bank failure will happen again and to protect American jobs and small businesses."

Former Massachusetts Rep. Barney Frank, who served on the board of the now-failed Signature Bank since 2015, said on Monday he doesn't blame Trump for the collapse of the bank.

Frank said factors such as “the nervousness and beyond nervousness from SVB and crypto" contributed to Signature Bank's collapse. 

Frank himself was in favor of raising the $50 billion asset level that was part of the 2010 Dodd-Frank law. The 2018 changes that that Trump signed into law raised the threshold for more stringent banking regulations to $250 billion.

"I think, if it hadn't been for FTX and the extreme nervousness about crypto, that this wouldn't have happened — even to SVB or to us," Frank said. "And that wasn't something that could have been anticipated by regulators."