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Barney Frank on SVB and Signature Bank Collapses (Audio) · Bloomberg Intelligence

• 0:00
  Speaker 1: I want to bring it back to one of the
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  Speaker 1: main stories today, which of course is a Signature bank
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  Speaker 1: getting shut down from the fallout of Silicon Valley Brank.
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  Speaker 1: I want to bring back our former guests that we
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  Speaker 1: were just talking about, Barney Frank, the co sponsor of
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  Speaker 1: the Dodd Frank Act as well as a board member
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  Speaker 1: of Signature Bank. Barney think he was always for joining
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  Speaker 1: us on the radio today. Let's start with a simple question.
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  Speaker 1: What happened? Well, one former board member that board was
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  Speaker 1: dissolved by the FDIC. What happened was the fallout? How
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  Speaker 1: would you say? I think from Silicon Valley Bank, we
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  Speaker 1: got hit although we Signature were in good shape. In fact,
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  Speaker 1: given what the FED and the FDIC announced today, if
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  Speaker 1: that been announced on Friday, we would have had no
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  Speaker 1: problem at all. We began to lose deposits on Friday
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  Speaker 1: out of reaction to what happened to Silicon Valley. What
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  Speaker 1: you also had was it wasn't because Silicon Valley. It
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  Speaker 1: was a punishment for anybody involved with clipped. This is
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  Speaker 1: a and I think in fact what happened was we
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  Speaker 1: had gotten into crypto allow in a way that no
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  Speaker 1: way put us to risk We facilitated our customers who
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  Speaker 1: wanted to deal with each other crypto, but we would
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  Speaker 1: not it as someone that was doing crypto, as I said,
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  Speaker 1: not in a way that was risky to us. And
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  Speaker 1: there was this fleeing of banks that we're seeing to
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  Speaker 1: a crypto now. It was a liquidity issue, not a
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  Speaker 1: soaleignty issue, and we had by Sunday actually gotten back
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  Speaker 1: to a point where we had to liquidity what I
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  Speaker 1: believe the regulators wanted to send a message that crypto
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  Speaker 1: is toxic, frankly, and they wanted to tell everybody to
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  Speaker 1: get as far away from crypto as they could. When
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  Speaker 1: we were signaled out to be the poster child for
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  Speaker 1: that message, we Burney, your CEO, Joe to Paolo has
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  Speaker 1: actually said the same thing you just said, which is
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  Speaker 1: the exposure was responsibly handled. It was limited exposure. We're
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  Speaker 1: Silicon Valley Bank, for example, had a lot more exposure
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  Speaker 1: to tech start up to be So, how did crypto
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  Speaker 1: lead to the shutdown of signature exactly? Walk us through
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  Speaker 1: the details? So two ways. First of all, depositors and
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  Speaker 1: like other banks, uh they cater to businesses as we do.
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  Speaker 1: We didn't care to high tech. We catered to largely
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  Speaker 1: commercial lenders. Were a big housing developer, which is one
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  Speaker 1: of the things I liked about our role. Um what so,
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  Speaker 1: we had a lot of large depositors who were uninsured,
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  Speaker 1: and they panicked knowing that we were involved with crypto,
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  Speaker 1: and we explained to them, but it was crypto in
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  Speaker 1: a very responsible way that didn't expose us. They didn't
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  Speaker 1: want to hear it. They just wanted to go to
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  Speaker 1: JP Morgan, a Bank of America, just in case. So
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  Speaker 1: what the way Crypto heard us was the fact that
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  Speaker 1: we are involved with crypto, although as I said, in
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  Speaker 1: a way different than s web uh and have large
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  Speaker 1: uninsured depositors. They panicked and fled. What the FED did
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  Speaker 1: now by announcing they would back up or what I
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  Speaker 1: see that they'd back up on each other depositors and
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  Speaker 1: make a liquidity facility open at the FED. That would
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  Speaker 1: have kept us from having a pop. And as I said,
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  Speaker 1: I think the regulators, knowing that we were involved with crypto,
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  Speaker 1: even though in a totally different way, wanted to send
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  Speaker 1: a message to get people away from crypto. I think
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  Speaker 1: some of the regulators, Uh, we're a little nervous that
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  Speaker 1: they've been a little to accommodating the crypto and particularly
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  Speaker 1: after FTX, which which is at Parney. You're talking about
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  Speaker 1: let me just let me just hop in here. You're
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  Speaker 1: talking about mostly uninsured deposits. Roughly nine deposits for signature
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  Speaker 1: were uninsured. Look, you're a co sponsor of a of
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  Speaker 1: the DoD FRAMEK Act, which is known for regulation. Why
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  Speaker 1: didn't why wasn't this addressed earlier? Because we were defeated.
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  Speaker 1: I it's a good point. I wanted to extend deposit
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  Speaker 1: insurance for larger businesses. We have a payroll issue. There
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  Speaker 1: had been a temporary extension of that two thousand and eight,
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  Speaker 1: and I pushed for it in a House version of
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  Speaker 1: the bill. We extended it, but we ran into political opposition,
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  Speaker 1: first from the large banks, which frankly don't want people
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  Speaker 1: to have that reassurance because that makes it likely for people,
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  Speaker 1: as happened now, to pull out of smaller banks to
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  Speaker 1: go to be of A or J people of the chase.
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  Speaker 1: We had Republican opposition who thought, well, this is interference
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  Speaker 1: with the economy. We had some people on the left
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  Speaker 1: who said, oh, don't insure the very rich. Although extending
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  Speaker 1: to business accounts that guarantee protects working people because it
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  Speaker 1: protects payroll. So the answer is, that's a good question.
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  Speaker 1: I tried to get it extended, and I hope that
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  Speaker 1: what will happen now is people having learned the backing
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  Speaker 1: of the uninsured, raising the insurance level will not be
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  Speaker 1: a one off for this crisis, but that former colleagues
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  Speaker 1: will take steps to extend it, particularly for payroll accounts. Well,
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  Speaker 1: should there be any limit? I mean shouldn't we? The
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  Speaker 1: FED has essentially come out now with its statement and
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  Speaker 1: UM assured depositors across the country that there's no more limit,
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  Speaker 1: that every every is that okay necessary, that's a necessary
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  Speaker 1: temporary America until they work out. And what I think
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  Speaker 1: you need to do is to raise the limit. First
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  Speaker 1: of all, a business account. We're not talking about rich
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  Speaker 1: individual's pocket money. We're talking about because what do you
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  Speaker 1: do if you're a business and you have to have
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  Speaker 1: me to payroll that's in the in the hundreds of
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  Speaker 1: thousands of millions. I would say, this is all the
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  Speaker 1: top of my head. I'm not there to do the
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  Speaker 1: research now that you would want to say that an
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  Speaker 1: amount that would get you through at least one payroll
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  Speaker 1: period and maybe two so you could then make other arrangements.
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  Speaker 1: But why why should there be any limit? Nan? Why
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  Speaker 1: should Why does America have the thousands of banks? So
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  Speaker 1: why not just have you know, like five or ten
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  Speaker 1: big institutions so that we don't have to have these
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  Speaker 1: problems all the time. Here's the reason. If you're talking
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  Speaker 1: about a personal account of a million dollars, five banks
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  Speaker 1: would do it. What if you're a business that has
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  Speaker 1: a payroll in the tens of millions, how many banks
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  Speaker 1: do you have to do? It would be very inefficient
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  Speaker 1: to have them have to have fifty banks. And why
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  Speaker 1: do it? It's to protect not the banks, but to
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  Speaker 1: protect working people. That's why there was a lot of
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  Speaker 1: pressure from I get that. I just don't understand why
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  Speaker 1: there should be a limit any I guess you could
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  Speaker 1: vilify rich people. Oh he has a million dollars in
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  Speaker 1: that bank account, but who cares? Like, why why should
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  Speaker 1: there be any limit? Why not ensure all deposits because
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  Speaker 1: there is a potential cost to the federal government, There
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  Speaker 1: is a potential moral that there's some too safety to
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  Speaker 1: having people check with that bank. You don't want banks
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  Speaker 1: that are irresponsible to have a restricted limit. I would
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  Speaker 1: make it pretty high. And I think the need again
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  Speaker 1: is and I'm not vilifying rich people. What I'm saying
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  Speaker 1: is that no policy need to protect millions of dollars
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  Speaker 1: in individual pocketation. There is a policy need to protect
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  Speaker 1: an institution that has payroll and not make them go
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  Speaker 1: to ten or twenty or forty banks, and to let
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  Speaker 1: them put the bank to have a bank which is
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  Speaker 1: sufficient to be stepping through a month's payroll. And that's
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  Speaker 1: the specifics I would work for. So what we tried
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  Speaker 1: to do in the House in two thousand and eight,
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  Speaker 1: we didn't have the votes to do it in the Senate.
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  Speaker 1: But I hope now people have learned frankly that we
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  Speaker 1: were writing and they will do that. Barney and New
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  Speaker 1: York Governor Kathy Hokell said the takeover of Signature Bank
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  Speaker 1: by federal regulators on Sunday, quote was not a bailout.
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  Speaker 1: Do you agree who said it wasn't? New York Governor
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  Speaker 1: Kathy Hukel, Yeah, Well, I don't see how it's a bailout.
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  Speaker 1: What's going to happen is, in fact, I don't think
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  Speaker 1: bailed out the depositor Earth. Yeah, but not just a
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  Speaker 1: Signature bank. Every depositive was Yeah, I'm sorry, Can I
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  Speaker 1: finish a sentence? Please? Please? The fact is nothing was
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  Speaker 1: done with regard to depositors at Signature Bank different than
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  Speaker 1: any other bank in America. So no, if it was
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  Speaker 1: a bare office signor it was a badhoff for everybody. Secondly,
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  Speaker 1: and I think for good policy reasons, you don't want
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  Speaker 1: to have people's payrolls going on man and hurting innocent
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  Speaker 1: people and the economy. Beyond that, what's going to happen
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  Speaker 1: is that the FDIC is going to sell the bank.
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  Speaker 1: I predict that they're going to get a pretty good
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  Speaker 1: place for it. Confirming that there was no reason endemic
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  Speaker 1: to the bank or intrinsic to the bank to shut
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  Speaker 1: it down, I think they were just trying to send
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  Speaker 1: an anti crypto message. But they as far as your
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  Speaker 1: shareholders are concern, nobody's going to get any money other
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  Speaker 1: than what's put in by a say we tax pay
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  Speaker 1: of money, and anyway we'll be repaying shareholders. Congressman, I
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  Speaker 1: want to ask you a couple questions about what's left
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  Speaker 1: of Signature Bank as well. Let's start with their digital payments.
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  Speaker 1: On one second, I'm going to hang on one second,
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  Speaker 1: so the train announcement stop station. Of course we are
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  Speaker 1: happy to wait for that, but of course there's going
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  Speaker 1: to be a lot of more headlines as well. And
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  Speaker 1: then the time we have left with you, Congressman, I
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  Speaker 1: want to ask you about the digital payments platform is Signette?
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  Speaker 1: Is it still online? Yes? I said, go ahead. Is
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  Speaker 1: Signette still online? The digital payments platform associated with Signature Bank?
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  Speaker 1: What platform Signette? I'm sorry I didn't hear the question.
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  Speaker 1: No worries. Let's move on to the next one. You're
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  Speaker 1: talking about the big banks and simply the regulation required
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  Speaker 1: for them. Who benefits from what you're seeing on the
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  Speaker 1: FDIC front and the FED front. Who benefits? Oh, who
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  Speaker 1: benefits from the FDIC Our work people who have to
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  Speaker 1: have have to be paid. Sure, but in terms of
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  Speaker 1: the shutdown of Signature Bank, where did those funds go?
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  Speaker 1: I'm sorry you actually meet different questions you asked me.
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  Speaker 1: I thought about who benefits in the first place, where
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  Speaker 1: the gudget depositors. Nothing is being done at Signature that
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  Speaker 1: isn't being done everywhere else, and the purposes so that
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  Speaker 1: people can meet pay rolls. And I'm along in favor
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  Speaker 1: of that. I know that's been out of the demand.
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  Speaker 1: As far as funds are concerned, other than yeah, there'll
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  Speaker 1: be funds that will bail out the deposits. The FDIC
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  Speaker 1: has announced, and again not differently for signature than any
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  Speaker 1: other bank, that there will necessarily be an assessment on
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  Speaker 1: other banks to build up the FDIC funds, as those
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  Speaker 1: payments come out of not general tax revenues, but FDIC
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  Speaker 1: funds that are generated by fees paid by banks. As
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  Speaker 1: far as shareholders are concerned, any recompanies, any conversation to
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  Speaker 1: shareholders will come from the postseeds when the FDIC sell
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  Speaker 1: signature to some other entity and where those gos. That'll
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  Speaker 1: be enough. Hey, Barney Crity and I were initially discussing
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  Speaker 1: your legislation this morning because it turns out that m
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  Speaker 1: SVB would have been under the scrutiny of regulators had
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  Speaker 1: it not been for the twenty eighteen partial repeal or
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  Speaker 1: exemption of banks holding less than one hundred billion dollars
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  Speaker 1: in assets from scrutiny right away and then one two
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  Speaker 1: hundred and fifty billion from scrutiny over the next year
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  Speaker 1: and a half exemption from Dodd Frank. Do you think
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  Speaker 1: that that's going to be turned back around. Are these
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  Speaker 1: banks Probably not. Here's a response to that. It was
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  Speaker 1: not an exemption from regulation. It was an exemption from
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  Speaker 1: a particularly stricter regulation, which still applies to the larger banks.
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  Speaker 1: I will tell you that signature was in that category
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  Speaker 1: of banks that got not the strictest regulation, but there
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  Speaker 1: was still serious regulation. And I will tell you that
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  Speaker 1: during that period, since two thousand eighteen, the regulators were
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  Speaker 1: very involved with signature. So no, I don't think. I
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  Speaker 1: think the problem was Frankly, digital as a new element
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  Speaker 1: in the system, and there was regulation or got in digital.
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  Speaker 1: I think what happened, Frankie was with ft apps that
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  Speaker 1: you scared people so much in digital that you got
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  Speaker 1: this deposit runs that weren't anticipated. But it wasn't a
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  Speaker 1: lack of regulation. The regulators had the power. They did
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  Speaker 1: not have the same strictness that they had, say with
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  Speaker 1: the Wells Fargo a city, But it was not a
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  Speaker 1: case of removing regulation. The banks were still subject to regulation.
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  Speaker 1: And I can tell you it was a Rodger signature.
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  Speaker 1: It was pretty it was pretty serious regulation even after
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  Speaker 1: that bill pass. The reason I ask is just that
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  Speaker 1: President Biden held a press conference this morning in which
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  Speaker 1: He said that he would ask Congress and banking regulators
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  Speaker 1: to strengthen the rules for banks to make it less
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  Speaker 1: likely that this kind of failure would happen. Do you
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  Speaker 1: see that as necessary with your experience? And yes, I
• 13:28
  Speaker 1: don't see it as necessary. Remember, this is not a
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  Speaker 1: widespread set of failures, in part becards to the rules
• 13:35
  Speaker 1: we did put in place so that even banks that
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  Speaker 1: were getting hit with deposit bungee still solvent because they
• 13:43
  Speaker 1: were better capitalized thanks to the legislation, and because they
• 13:47
  Speaker 1: were not allowed to get involved thanks to the vocal
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  Speaker 1: rule and extensively whisky underplunded delivatives. I think there were
• 13:54
  Speaker 1: ways of regulations should be tightened. Yes, So I don't
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  Speaker 1: think it's you know, I wouldn't say necessary, but I
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  Speaker 1: think it would be very beneficial to tighten them in
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  Speaker 1: some ways. Congressmen at signature banks specifically, when did the
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  Speaker 1: bank know that the federal government was very concerned about
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  Speaker 1: it and would in fact take it over today? We
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  Speaker 1: heard about it on over the weekend. What happened was
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  Speaker 1: on Friday things were okay, and then on Friday afternoon
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  Speaker 1: we got hit with a billions and billions of dollars
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  Speaker 1: in with all the deposits. Because we are business oriented
• 14:33
  Speaker 1: and a lot to developers, property owners, housing people, we
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  Speaker 1: have large depositors disproportionally to say the average bank, and
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  Speaker 1: we began to get these deposit outflows on Friday, began
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  Speaker 1: dealing with them. I believe by Sunday we had resolved
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  Speaker 1: that finding what capital and the deposit out we stopped.
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  Speaker 1: I believe that the regulators stepped in even after we
• 15:01
  Speaker 1: had managed to stabilize that because of the determination to
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  Speaker 1: get people to move away from from crypto, and we
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  Speaker 1: were a post a child for that decision. Barney, was
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  Speaker 1: there any wrongdoing a Signature break, any fraud anyone? Any
• 15:19
  Speaker 1: fraud any I'm sorry I say any wrongdoing. Did anything
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  Speaker 1: wrong happen at Signature Bank? In your opinion? Anything wrong?
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  Speaker 1: Did you say? Yes? I know, I don't think if
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  Speaker 1: there hadn't been that run on deposits, um you wouldn't
• 15:39
  Speaker 1: have had the publem And by the way, I just
• 15:41
  Speaker 1: learned this morning the FDIC has removed the Chamans out
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  Speaker 1: the board and removed the CEO and advice chair, but
• 15:51
  Speaker 1: as otherwise kept all the people in place, including the
• 15:54
  Speaker 1: people who run the bank. And I think you'll see
• 15:57
  Speaker 1: when they when the sale comes and it's a fundamentally
• 16:01
  Speaker 1: sound bank. And no, they have not pointed to any
• 16:04
  Speaker 1: specific pattern of longdoing or incompetence. It was, as I said,
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  Speaker 1: the run spurred by the combination fd X s BB,
• 16:20
  Speaker 1: and that's wept us. All right. Congressman, thank you so
• 16:23
  Speaker 1: much for your time. We really appreciate. We're gonna let
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  Speaker 1: you go and let you get your train. Congressman Barney Frank,
• 16:28
  Speaker 1: former representative for the US House of Representatives for the
• 16:32
  Speaker 1: state of Massachusetts,