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Some in Washington blame the bank failures on a rollback of landmark banking rules

LEILA FADEL, HOST:

Some Democrats in Washington blame the recent bank failures on a rollback of landmark banking regulations. Those regulations were meant to stop a repeat of the 2008 financial crisis. And this is what Massachusetts Senator Elizabeth Warren said when I asked her about it yesterday.

ELIZABETH WARREN: I warned, this is not going to work. This is not going to end well. And sure enough, we saw the consequences of that over the weekend.

SACHA PFEIFFER, HOST:

Warren was talking about legislation in 2018 that decreased regulations known as Dodd-Frank. That had the effect of giving midsize banks a break. But after the collapse of Silicon Valley Bank and Signature Bank, Warren and other Democrats want to turn back the clock.

FADEL: Carter Dougherty is with the left-leaning advocacy group Americans for Financial Reform. He says that 2018 decision wouldn't have happened without bipartisan support.

CARTER DOUGHERTY: The Senate being what it is, the bank lobby that supported this had to peel off a certain number of Democrats in order to get it through the Senate. And they did succeed in doing that.

FADEL: Sixteen Senate Democrats voted for what was called the Crapo bill, named after its sponsor, GOP Senator Mike Crapo of Idaho.

DOUGHERTY: Money does talk in Washington. There was a significant effort by commercial banks, especially in that 50 to $200 billion size range, that stood to benefit from the deregulation of the legislation.

PFEIFFER: Senator Chris Coons of Delaware was among the Democrats who voted to ease the rules for midsized banks. In a statement to MORNING EDITION, he told us it's not clear whether the old Dodd-Frank regulations would have made a difference. He also said relaxing some of those rules helped many community banks stay in business.

FADEL: Former Democratic Congressman Barney Frank agrees. He's the Frank in Dodd-Frank and a former board member of Signature Bank, which was shut down by regulators over the weekend.

BARNEY FRANK: 2018 didn't say no regulation or weak regulation. It said you wouldn't regulate a bank at 50 billion in assets the same way you would regulate a bank in several trillion. But they retain strong power to regulate.

PFEIFFER: Frank told NPR's All Things Considered that he believes investment in cryptocurrency contributed to Signature Bank's collapse. Frank says by shutting down that bank, regulators in New York were sending a message that, in his words, crypto is toxic. Those are two different narratives on what went wrong, both coming from Democrats. Transcript provided by NPR, Copyright NPR.