In the wake of Silicon Valley Bank’s demise, Florida Gov. Ron DeSantis pointed fingers at several culprits, including the company’s diversity initiatives and federal regulators who he said “always seem to whiff” at preventing a financial crisis.
But left out of DeSantis’ comments was his own record on banking regulations. As a member of Congress, DeSantis was an outspoken champion for lifting regulation on small and mid-sized financial institutions, and in 2018 he voted for a bill that eventually became law loosening oversight of mid-size banks like Silicon Valley Bank.
The 2018 legislation, which then-President Donald Trump signed into law, is under renewed scrutiny amid the collapse of Silicon Valley Bank, the lender to startups whose recent collapse has rocked the venture capital world and sent chills through the country’s financial system. The law, which passed with bipartisan support, rolled back regulations known as the Dodd-Frank Act passed by Congress and signed by President Barack Obama in the aftermath of the 2008 financial crisis, including some for smaller and medium-sized institutions.
Among the 75-page law’s many provisions was a measure backed by regional banks that raised the asset threshold for tougher supervision by federal banking regulators from $50 billion to $250 billion. That would have affected Silicon Valley Bank, which had $209 billion in total assets at the end of 2022, according to the Federal Deposit Insurance Corporation.
DeSantis had little to say publicly about the 2018 law, one of his last major votes as a member of the US House of Representatives before he resigned to run for governor – but the year before, he repeatedly boasted about Republican votes to repeal Dodd-Frank in interviews on Fox Business Network.
During one such appearance in June 2017, DeSantis forcefully argued for easing restrictions on banks that were lower on the financial food chain.
“You know, the Dodd-Frank piece I think would be very good for the economy, moving away from too big to fail and really lifting the burden off a lot of our small and medium-sized financial institutions who have just gotten clubbed by Dodd-Frank,” DeSantis said.
DeSantis’ office declined to comment on his 2018 vote. Speaking to Fox News on Sunday, DeSantis pointed the finger elsewhere, saying, “We have a massive federal bureaucracy, and yet they never seem to be able to be there when we need them to be able to prevent something like this.”
The remarks Sunday “stand on their own,” DeSantis’ spokesman Bryan Griffin said Monday.
The 2018 vote is the latest example of how DeSantis’ congressional record is rife with potential headaches for the Florida Republican as he considers launching a campaign for president. CNN’s KFile previously reported that DeSantis has called for the privatization of Medicare and Social Security, a position that both Trump and Democrats have seized on and DeSantis has since backed away from. DeSantis also once supported a hawkish approach to arming Ukraine and confronting Russia, but has lately echoed Trump in statements critical of US involvement in the overseas conflict.
DeSantis is not alone among 2024 contenders in supporting the rollback of Dodd-Frank. Besides Trump, who successfully urged Congress to ease banking regulations, potential candidates Sen. Tim Scott of South Carolina, former Rep. Liz Cheney of Wyoming and now-South Dakota Gov. Kristi Noem voted for the 2018 law.
The 2018 law gave the Federal Reserve flexibility to apply stricter regulations to particular banks with at least $100 million in assets, and banks that eclipsed that threshold still faced “periodic” stress tests under the 2018 law. But increasing the enhanced regulation standard to $250 billion was perceived as a major victory for mid-sized banks that was pushed in part by SVB CEO Greg Becker.
As Becker wrote in 2015 congressional testimony before a Senate committee, those stricter regulations “would stifle our ability to provide credit to our clients without any meaningful corresponding reduction in risk.”
But DeSantis’ past calls for a more laissez-faire approach to the financial industry are also at odds with his more recent moves to punish banks and sever ties with financial institutions that consider factors like the environment and social good in their investment and lending strategies, a business framework known as environmental, social and governance, or ESG. DeSantis on Sunday faulted progressive corporate policies for the demise of Silicon Valley Bank.
“They’re so concerned with (diversity, equity and inclusion) and politics and all kinds of stuff. I think that really diverted from them focusing on their core mission,” DeSantis told Fox.
The comments parroted a report over the weekend from another news organization in Rupert Murdoch’s media empire, the New York Post, which published a story outlining the bank’s diversity and inclusion efforts. Asked what DeSantis was referencing in his comment, his office declined to elaborate. Former FDIC chair Sheila Bair, a Republican appointed by President George W. Bush, laughed at the accusation during an interview with CNN This Morning on Tuesday.
“Let’s not politicize this,” Bair said. “That’s not really helpful.”
Unsaid in DeSantis’ criticism is Florida’s financial ties to SVB. As of last June, Florida’s pension system had $1.7 billion invested in funds managed by SVB Capital, the investment arm of the financial group behind Silicon Valley Bank. That figure has doubled since DeSantis became governor. DeSantis is one of three trustees to the State Board of Administration, the body that oversees the state’s pension funds.
While the state has a sizable stake in SVB’s related businesses, its direct exposure to the bank was less than $25 million of the state’s $177 billion in retirement investments, according to the state board’s spokeswoman.
DeSantis’ push to unravel Dodd-Frank started during his successful first race for a Florida congressional seat in 2012, when he ran as a tea party conservative whose platform called for repealing Dodd-Frank and the Sarbanes-Oxley Act – a bill that passed overwhelmingly in 2002 with only three combined no votes in the House and Senate following the accounting scandals at Enron and WorldCom.
After he won, DeSantis helped found the conservative House Freedom Caucus, and he worked with other conservatives to make repealing Dodd-Frank a priority. Early on, DeSantis specifically focused on rollbacking rules for community banks and repeatedly voted for legislation repealing large portions of the law.
But by 2017, with Trump newly elected, House Republicans responded to the president’s broader calls to repeal parts of Dodd-Frank by passing the Financial CHOICE Act. In addition to weakening many regulations on banks, it also would have eliminated the Orderly Liquidation Authority that allows the federal government to step in if a bank is near collapse. DeSantis voted for the bill.
Four days after it passed, DeSantis appeared on “Mornings with Maria” on Fox Business where he argued that the bill would free up lending for small businesses. DeSantis contended, “It’s really the smaller- and medium-size institutions that get hurt” by Dodd-Frank.
He lamented that it was unlikely the Senate would take up the House bill. Instead, the Republican-controlled Senate passed its own bill in 2018, with support from 17 Democrats, and sent it to the House. The Senate bill did not repeal the Orderly Liquidation Act but it included fewer regulations on mid-sized banks.
DeSantis voted for it, and Trump signed it into law.
Em Steck and Kit Maher contributed to this report.