News Release: Biden Bank Regulation Plan Offers Critical First Steps to Reversing Deregulation


March 24, 2023

Carter Dougherty 

Biden Bank Regulation Plan Offers Critical First Steps to Reversing Deregulation
Yellen cites need to address “new areas of risk” to financial system

Washington, D.C. – The banking regulation plan outlined by the White House today is an absolutely necessary response to the financial instability triggered by the collapse of Silicon Valley Bank on March 10. But only continuing action by the president, the regulators, and Congress can achieve the changes necessary for a more equitable and stable financial system.  

“The priorities the White House laid out today rightly take aim at the so-called tailoring rules the Fed wrote to implement the financial deregulation legislation during the Trump administration,” said Renita Marcellin, legislative and advocacy director of Americans for Financial Reform. “But the financial regulators and Congress should take action beyond un-doing the deregulatory agenda of the Trump administration to further strengthen the financial system and put the interests of regular people ahead of maximum profits and bonuses at big banks.”

Treasury Secretary Janet Yellen today also cited her “major priority to restore and strengthen our financial stability apparatus” and highlighted the need to address “new areas of risk,” a critical step that will involve looking beyond traditional banks.

“While we have seen many risks rear their heads in the banking system, we are only starting to see cracks emerging in the shadowy non-bank sector, which is subject to even less regulatory oversight and supervision than the banks,” said Andrew Park, senior policy analyst at AFR. “And banks are often active lenders to non-banks such as hedge funds, private equity, and venture capital, creating the potential for contagion between the two sectors.”

AFR published a report, “Giant in the Shadows,” covering many of the problematic types of credit that could be a source of financial instability.

AFR has called on the Treasury to reinvigorate the Financial Stability Oversight Council, a Treasury-led body created under Dodd-Frank that can address new risks emanating from sources other than traditional banks, and the Office of Financial Research. Trump appointees badly weakened FSOC’s ability to curb risk in the nonbank sector, such as private equity and hedge funds, and money market funds, which have seen over a quarter-trillion dollars in inflows since the banking crisis began. They also hollowed out OFR’s research capacity.

Much of what the White House outlined today involves safeguards, especially around banking supervision, that were weakened in response to the passage of S.2155 in 2018. It has previously called for legislation to allow regulators to claw back bonuses and increase accountability. And regulators must still implement Section 956 of Dodd-Frank, which aims to prevent executive compensation from encouraging unnecessary risks.

“The bank lobby and their allies in Congress will never stop trying to pretend that deregulation had nothing to do with this banking crisis so that bankers can keep enjoying the upsides of reckless risk-taking and stick the rest of us with the costs,” Marcellin said.