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Dr. Rashad Richey

National TV Political Analyst, Talk Radio Host, Univ. Prof.

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Opinion

Bad bank executives need more oversight from regulators

Mar 24, 2023

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Dr. Rashad Richey

National TV Political Analyst, Talk Radio Host, Univ. Prof.

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The failures of Silicon Valley Bank and Signature bank have set off the blame game in the tech industry, the banking industry, and Congress. Some say there weren’t enough regulations. Others say there were plenty, but regulators just didn’t act on reports of a liquidity crisis at SVB. Cryptocurrency advocates say centralized banking was to blame. Crypto skeptics argue the recent cryptocurrency scandals conditioned people to panic at the first sign of trouble.

Straight Arrow News contributor Rashad Richey says he agrees with the folks who say regulators need to do more regulating.

Okay, don’t mess with my money. Everyone should have that attitude. But let’s be clear about what’s happening now: multiple banks failing due to actual policy connected to deregulation in the United States of America.

President Biden: he says everything’s okay. Your money is safe, everybody will be made whole. But that’s not the issue, is it? The issue is, is the principle still in place to allow bank executives to not only (a) manipulate the system, so they can get a bunch of money, and (b) at the same time of their manipulation, not adhere to the design of their job? They are literally in position to manage risk, to understand them when they come, to be able to shift and adjust, given their level of expertise. 

This is Banking 101. They should have seen this coming. Now, in a normative context, not a big deal. Deposits are secure. But when you have rising inflation, you must check these elements of the market regularly. This is part of your job.

Now, I’m with Senator Elizabeth Warren on this. You see, Senator Warren said that, of course, tools existed to stop this from happening. She said, “But the change in the law in 2018 was an open invitation from Congress for the Fed to weaken all of those rules, vote to eliminate some of them, and to make the others much, much softer than they had been.”


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Okay, don’t mess with my money. Everyone should have that attitude. But let’s be clear about what’s happening now: multiple banks failing, due to actual policy connected to deregulation in the United States of America,

President Biden, he says, everything’s okay. Your money is safe, everybody will be made whole. But that’s not the issue, is it? The issue is, is the principle still in place to allow bank executives to not only a) manipulate the system, so they can get a bunch of money, and b) at the same time of their manipulation, not adhere to the design of their job. They are literally in position to manage risk, to understand them, when they come, to be able to shift and adjust, given their level of expertise. 

This is Banking 101, they should have seen this coming. Now, in a normative context, not a big deal. Deposits are secure. But when you have rising inflation, you must check these elements of the market regularly. This is part of your job. Now, I’m with Senator Elizabeth Warren on this. You see, Senator Warren said that, of course, tools existed to stop this from happening. She said, “But” and I quote, “the change in the law in 2018, was an open invitation from Congress for the Fed to weaken all of those rules, vote to eliminate some of them, and to make the others much, much softer than they had been.”

I agree with the senator. Now, there are those who are simply against regulation. I’m against regulation for the sake of regulation. I’m for regulation as it relates to actually protecting people. Regulation must be done in a good faith stance. You must have a good faith basis for jt to be effective. There are always people who will win and lose as it relates to policy. There are people who will be protected as it relates to policy and maybe others will be exposed. What I’m saying is, I would prefer to support a policy that protects the masses, but perhaps provides some level of exposure to the executives. 

You see these executives acted outside of what we would consider to be decent. Senator Elizabeth Warren also said this was entirely avoidable. And the quote is “No one, no one should make or should be mistaken about what unfolded over the past few days in the U.S. banking system. These recent bank failures are the direct result of leaders in Washington weakening the financial rules.” This is an op-ed published in the New York Times. 

But there are many Democrats who also supported this deregulation, so to speak. In 2018, one Democrat, kind of doubled down. Shaheen, a Democrat, said “It’s early. I think we need to complete the investigation of what actually happened at Silicon Valley Bank. All the regulation in the world isn’t going to fix bad management practices, and it appears that that’s one of the problems at SVB.”   – Jeanne Shaheen, D-N.H.

Wow, fascinating. Yes, that is the issue. You said it. Bad banking management. You said it, which means if somebody is doing a bad job at actually managing money, based on your own words, why would you not look at at least restoring the regulations you took away? Or perhaps doing it a better way? Why ignore the reality that bad bank managers will only get better or only become good bank managers if you are involved in the process? Do you think they will simply magically become good and the people who believe in them, the people who trust them, will not be taken advantage of again? Negligence won’t happen? Regulation means paying attention because there’s an oversight dynamic to the operation you’re engaged in. Why would we eliminate this level of regulatory oversight? It protects people.

Now, I understand. There are many on both sides of the political aisle, they have been purchased by corporations and banks. Also these affiliate relationships murky things up. But at the end of the day, the most sacred contract any politician will ever have is that contract on Election Day when a voter said I trust you.

 

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