Elizabeth Warren slams ‘overnight’ bailout for SVB customers, leaving ‘millions of student loan borrowers in limbo’

• Regulators stepped in on Sunday to “completely” protect Silicon Valley bank depositors from fallout.

• Sen. Warren criticized the SVB’s customer protections as millions of student loan borrowers are “in limbo”.

• Borrowers have yet to be largely exonerated and are waiting for the Supreme Court to rule on the legality of Biden’s debt relief.

It’s been a whirlwind for the banking system in recent days.

On Friday, controller switched off the California based Silicon Valley Bank after a few chaotic days no fundraising led to a flood of depositors withdraw their money from the bank. The speed with which the SVB closed its doors was shocking and became what is known today as the second largest bank failure in the US following the closure of Washington Mutual during the 2008 financial crisis.

To add to the shock, the regulators Shut down crypto-friendly signature bank on Sunday, but the US Treasury Department, the Federal Reserve and the Financial Deposit Insurance Corporation released a joint statement on Sunday that depositors would be “fully” protected from financial losses.

Massachusetts Senator Elizabeth Warren wrote on a Monday Opinion article for the New York Times that what happened to the SVB is “the direct result of the weakening of financial rules in Washington,” referring to those of former President Donald Trump Release of provisions within the Dodd Frank Act, which protected consumers from it Big bank actions.

“On Sunday night, regulators announced they would ensure all deposits with SVB and Signature were returned at 100 cents on the dollar. Not just small businesses and nonprofits, but billion-dollar corporations, crypto investors, and the very venture capital firms that sparked the bank run on SVB in the first place — all in the name of preventing further contagion,” Warren wrote.

“Regulators have said banks, not taxpayers, will foot the bill federal backstop required to protect deposits. We’ll see if that’s true,” she continued. “But it’s no wonder the American people are skeptical of a system that keeps millions of student loan borrowers in limbo but steps in overnight to ensure billionaire crypto firms don’t lose a penny in deposits.”

The story goes on

Warren has long pushed for tighter regulation of large banks, as well as protections for student loan borrowers. Regulatory protections for SVB customers are coming as Millions of borrowers are waiting The Supreme Court must rule on whether President Joe Biden’s plan to forgive up to $20,000 in student debt is legal. With 45 million Americans holding $1.7 trillion in student debt, they’ve never received relief on the scale Biden is proposing, and Warren and other Democrats are pushing for this forgiveness to help borrowers break free recover from the financial impact of the pandemic.

Republican lawmakers have blasted student debt relief at some as a “bailout.” calls for the discharge to be blocked on a potential deal to raise the debt ceiling.

It’s unclear if borrowers will end up getting the “bailout” that GOP lawmakers oppose, but for now Warren wants to make sure big banks won’t be able to evade regulation.

“These bank failures were entirely avoidable if Congress and the Fed had done their jobs and maintained strict banking regulations since 2018,” Warren wrote. “SVB and Signature are gone, and now Washington must act quickly to prevent the next crisis.”

Continue reading the original article Business Insider