There is no shortage of articles examining what happened leading up to the recent banking developments, but there is a shortage of immediate answers to a looming problem: what happens next? Compounding that is the cloud of uncertainty hovering over Washington.
What are the financial regulators going to do? What action, if any, will Congress or the Biden administration take? Over the coming days, weeks and months, we will see these questions addressed as the federal response evolves through congressional oversight, hearings, and investigations with key regulators, banking executives, and top Administration officials.
As this is a constantly changing situation, there are several items to be tracking at the federal level including what legislation is introduced, what current statutes may change, what new regulations will be considered, and perhaps most importantly, what banks and businesses could be targeted and impacted.
For example, Senator Elizabeth Warren (D-Mass.), a key voice in the U.S. Senate on banking reform, has already introduced a bill targeting the banking industry. Warren’s bill, the “Secure Viable Banking Act,” would reinstate a more stringent Dodd-Frank era regulation that was repealed under the Trump administration. Additionally, both the U.S. Senate Banking Committee and the U.S. House Financial Services Committee announced hearings next week that will feature financial regulators and other witnesses to evaluate the situation. More hearings will likely follow suit.
Hopefully lessons were learned from the 2008 financial meltdown when regulators, Congress, and the banking industry were left scrambling to stop the spread of contagion. “As important as what we did, is what we didn’t do,” Dennis Cardoza, co-chair of Foley Federal Public Affairs practice and former Member of Congress who served in House leadership in 2008, said while highlighting the risk of Congress rushing to pass onerous regulations impeding businesses from obtaining legitimate credit. “In a rush to fix the system, it’s critical not to make the banking system so difficult to navigate that legitimate businesses can’t get credit,” he added.
It is clear that there is an important needle to be threaded when it comes to balancing appropriate regulations and business needs to ensure we keep the economy flush.
Navigating the federal government and the complex regulatory and legislative ecosystem is a job on its own. Understanding Washington’s political landscape and how it plays a role in crafting policy makes it even more nuanced. While the public will be able to watch congressional hearings and read relevant news alerts, it will be what’s happening behind closed doors that’s even more important.
As the aftermath to the global banking developments continues to unfold, increased efforts from the public affairs world will continue. It’s critical to stay up to date with what is happening at the federal level whether you are in the banking industry or a sector that could be impacted.
Author: Katie Schoettler, Public Affairs Director at Foley & Lardner LLP