Barney Frank — the former congressman known for the Dodd-Frank Act, which overhauled US banking regulation to prevent another global financial crisis — said there was one thing lawmakers and regulators didn’t reckon with back in 2008: cryptocurrencies.
(Bloomberg) — Barney Frank — the former congressman known for the Dodd-Frank Act, which overhauled US banking regulation to prevent another global financial crisis — said there was one thing lawmakers and regulators didn’t reckon with back in 2008: cryptocurrencies.
“Digital currency was the new element entered into our system,” the 82-year-old Frank said in an interview Sunday. “A new and destabilizing – potentially destabilizing – element is introduced into the financial system. What we get are three failures.”
Signature Bank was closed by New York state financial regulators Sunday in a shocking third banking collapse in a week, after the failure of fellow crypto-friendly bank Silvergate Capital Corp. and the seizure of SVB Financial Group’s Silicon Valley Bank. Frank himself is a board member at Signature Bank, which had been pulling back from digital assets, and he said clients may have overestimated Signature’s exposure to crypto.
Still, Frank said, 2023 is not 2008. The financial system is less vulnerable than it was back then, and while the crypto sector is hurting the banking industry, it won’t break it, he said. “The negative consequences of that have been unfortunate for some people, but are not systemically problematic.”
Here are some additional comments from a Bloomberg Radio interview with Frank on Monday:
- The regulators “wanted to send a message to get people away from crypto,” Frank said. “We were singled out to be the poster child for that message.”
- “We didn’t cater to high tech — we catered to largely commercial lenders,” he said of Signature Bank.
- Frank on large depositors: “They panicked, and fled,” because of Signature’s ties to crypto.
- The Federal Deposit Insurance Corp. should raise the insurance limit for business accounts, Frank said. “I’m not talking about rich individuals’ pocket money,” he said. “What do you do if you’re a business and you’ve got to meet a payroll that’s in the hundreds of thousands or millions?”
–With assistance from Paige Smith.
(Updates with Bloomberg Radio interview in bullet points at end.)
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