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.
He alleged that Senator Warren and others encouraged runs on crypto-friendly banks and used that as an excuse to shut them down.
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.
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.
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.
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.
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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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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