One of the Dodd-Frank Act drafters, Barney Frank, said regulators shut Signature Bank down to send an anti-crypto message.
In shocking revelations, Frank told CNBC that there was “no real objective reason” for the FDIC to seize Signature because the bank was “technically solvent.”
Signature Board Shocked by Shutdown
This statement follows Frank’s comment to Bloomberg on March 13, 2023, after regulators shut the bank down.
“I think that if we’d been allowed to open tomorrow, that we could’ve continued,” said Frank, who sits on Signature Bank’s board.
Much to management’s surprise, regulators shut down the bank after customers moved deposits to bigger Wall Street banks like JPMorgan. The bank’s executives believed they had stabilized the large outflows on March 12, 2023. Notably, Signature had said earlier that they would slash their crypto deposit base by $10 billion.
Additionally, no reports have surfaced regarding alleged insolvency.
The Federal Deposit Insurance Corporation (FDIC) placed Signature into receivership on Sunday, March 12, 2023.
Soon after that, customer assets were transferred to Signature Bridge Bank NA. Customers could withdraw deposits from the new bank the FDIC is operating.
Nic Carter Claims Signature Bank Shutdown Was a ‘Political Scalp’
Crypto venture capitalist Nic Carter confirmed from independent sources that regulators shut down the bank as a political ploy obscured by the media noise surrounding the banking sector in the last few days.
Heard this independently from other sources as well. I suspected as much last night but confirmed today. Signature was executed last night not due to any runs but as a political scalp, intended to be veiled by the fog of war.
— nic carter 🌠 (@nic__carter) March 13, 2023
He alleged that Senator Warren and others encouraged runs on crypto-friendly banks and used that as an excuse to shut them down.
My conclusion is that politicians like Liz Warren together with regulatory bodies fragilized crypto banks and encouraged runs against them, then used withdrawals as a pretext to close them down
What was meant to be a surgical operation became a massive banking crisis.
— nic carter 🌠 (@nic__carter) March 13, 2023
According to Carter’s sources, the FDIC was told that Signature’s Signet crypto payments network posed a “systemic risk” defined in the Dodd-Frank Act. Signature launched the Signet network as a real-time blockchain payment system that clients could access through application programming interfaces. Signet converted U.S. dollars into ERC-20 tokens.
Apparently even FDIC was surprised when it was dropped into their hands. The claimed justification was Signatures Signet product, which was perceived to be “systemic”
— nic carter 🌠 (@nic__carter) March 13, 2023
According to the Dodd-Frank Act, receivership is distinct from bankruptcy. Treasury Secretary Janet Yellen would have determined whether the financial firm’s potential failure would pose a significant economic risk. If so, the act allows the FDIC to liquidate and wind down a complex financial company.
Dodd-Frank Act | Source: Cornell Law School
Political Undertones in Silvergate Collapse
Last week also saw the shutdown of Signet’s competitor, the Silvergate Exchange Network, owned by California bank Silvergate Capital Corp. The network allowed crypto investors to transact with exchanges, provided both had banking relationships with Silvergate. About 90% of Silvergate’s deposits were crypto-related.
Silvergate did not fall into the hands of regulators but voluntarily liquidated after selling securities at a massive discount to honor customer withdrawals.
Nevertheless, Senator Elizabeth Warren, who Carter alleges encouraged runs at Silvergate and Signature, had criticized Silvergate for its alleged involvement with collapsed Bahamian exchange FTX.
As the bank of choice for crypto, Silvergate Bank’s failure is disappointing, but predictable. I warned of Silvergate’s risky, if not illegal, activity—and identified severe due diligence failures. Now, customers must be made whole & regulators should step up against crypto risk.
— Elizabeth Warren (@SenWarren) March 8, 2023
Warren was also a vocal opponent of changes to the Dodd-Frank act by the Trump administration through the Economic Growth, Regulatory Relief, and Consumer Protection Act in 2018.
I agree with @POTUS. We must immediately repeal Trump’s 2018 rollbacks of financial regulation. Regulators must also act to prevent another crisis—that starts with Chair Powell reversing the Fed’s disastrous Trump-era “tailoring” initiatives that helped create this mess. https://t.co/x4mPou5ZKZ
— Elizabeth Warren (@SenWarren) March 13, 2023
The Massachusetts senator believes that the recent failures of Silicon Valley Bank and Signature resulted from weakened banking policies.
“S.V.B. suffered from a toxic mix of risky management and weak supervision,” she said in a New York Times op-ed.
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Disclaimer
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.
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