After successfully lobbying, for the rollback of new rules applied to Wall Street in the wake of the financial crisis, lobbyists for Silicon Valley Bank immediately began pressing their case further to the federal authority that insures bank deposits in the event of another crisis, according to lobbying disclosures reviewed by The Intercept. The lobbying effort managed to exempt banks the size of SVB from more stringent regulations, including stress tests aimed at uncovering the type of weaknesses that led to the bank’s implosion last week. Two of the bank’s top lobbyists previously served as senior staffers for House Speaker Kevin McCarthy, who himself pushed for the repeal of significant pieces of the landmark Wall Street reform legislation known as Dodd-Frank.
The meltdown of Silicon Valley Bank on Friday represents the second largest bank collapse in American history and the first since the 2008 financial crisis. Over 90 percent of SVB’s deposits exceed the amount federally guaranteed by the FDIC, meaning those people may never see their money again, or may lose substantial amounts.
SVB’s president, Greg Becker, himself pushed for weaker banking regulations, telling congress to lift “enhanced prudential standards…given the low risk profile of our activities,” as The Lever reported.
A chief culprit, economists say, is legislation signed into law by President Trump in 2018, which rolled back key parts of the Dodd-Frank banking regulations passed in the wake of the 2008 financial crisis. That 2018 legislation, called the Economic Growth, Regulatory Relief, and Consumer Protection Act, passed with strong support from the Republican Party and critical support from some Democrats. Among those leading the charge was then-House Majority Leader Kevin McCarthy, who is now House Speaker.
“We’re going to move this Senate bill directly to the president’s desk to ensure these reforms help the economy to grow further by making community banks stronger,” McCarthy said of the legislation in 2018. “This is going to free up a great deal of capital and this will help a lot.”
Two former staffers for House Speaker Kevin McCarthy are registered lobbyists for Silicon Valley Bank, with one specifically lobbying on the 2018 Dodd-Frank repeal law that experts say made this crisis more likely, according to federal lobbying disclosures reviewed by The Intercept.
Other SVB lobbyists worked for political figures cutting across both parties including President Bill Clinton, former Sen. Mike Enzi, R-Wy., former Sen. Tom Coburn, R-Okla., Rep. Joe Courtney, D-Conn., former Sen. Arlen Specter D/R-Pa., and former Rep. Jay Inslee, now governor of Washington.
Brian Worth served as coalitions director for McCarthy from January 2011 to May 2014, when he was House Republican Whip. Since March of 2017 he’s been a partner at Franklin Square Group, where he’s worked as a lobbyist for SVB. Wes McClelland served as a policy advisor and senior policy advisor for McCarthy from April 2011 to September of 2015 and joined Franklin Square in January of last year, where he has also lobbied on SVB’s behalf.
Franklin Square is the only lobby group that SVB has used in over a decade, having lobbied on its behalf every year from 2009 to 2023. The only other lobby shops SVB has employed were DLA Piper from 2009-2010 and McGuireWoods consulting from 2010-2011.
A spokesperson for McCarthy did not immediately respond to a request for comment.
Worth lobbied on the repeal law beginning on October 1, 2017, right up to its passage on May 24, 2018. Then, starting on July 1, 2018, SVB began lobbying the FDIC — the very same federal agency responsible for insuring bank deposits, which was tasked with implementing critical portions of Dodd-Frank.
Though Franklin Square has lobbied on behalf of SBV since 2009, the 2018 filing represents the first time it had ever lobbied the FDIC.
Beginning on April 20, 2022, McClelland also began lobbying the FDIC on SBV’s behalf, which both he and Worth continued doing right up until SBV’s last lobbying filing this year.
The lobbying disclosures do not provide any more detail about the work. Neither Worth nor McClelland immediately responded to requests for comment.
“This was a 100 percent avoidable problem,” economist Dean Baker told The Intercept in an email, pointing to the Dodd-Frank repeal bill. “That bill raised the asset threshold above which banks have to undergo stress tests from $50 billion to $250 billion. SVB would have been required to undergo regular stress tests before the revision; among the stresses you look at are sharp rises in interest rates, which is apparently what did in SVB. Presumably, if its books had been subject to this test, the risk would have been detected and they would have been required to raise more capital and/or shed deposits.”
This content originally appeared on The Intercept and was authored by Ken Klippenstein.