Silicon Valley Bank Used Former McCarthy Staffers to Weaken Regulations, Lobby FDIC

Two senior aides to House Speaker Kevin McCarthy were among the top lobbyists for the bank at the center of a new financial crisis.

Silicon Valley Bank headquarters in Santa Clara, California, on Friday, March 10, 2023.
Silicon Valley Bank headquarters in Santa Clara, Calif., on March 10, 2023. Photo: Philip Pacheco/Getty Images

After successfully lobbying for the rollback of new rules applied to Wall Street in the wake of the financial crisis, lobbyists for Silicon Valley Bank immediately began pressing their case further to the federal authority that insures bank deposits in the event of another crisis, according to lobbying disclosures reviewed by The Intercept. The lobbying effort managed to exempt banks the size of Silicon Valley Bank from more stringent regulations, including stress tests aimed at uncovering the type of weaknesses that led to the bank’s implosion Friday. Two of the bank’s top lobbyists previously served as senior staffers for House Speaker Kevin McCarthy, who himself pushed for the repeal of significant pieces of the landmark Wall Street reform legislation known as Dodd-Frank.

The meltdown of Silicon Valley Bank represents the second-largest bank collapse in American history and the first since the 2008 financial crisis. Over 90 percent of the bank’s deposits exceed the amount federally guaranteed by the Federal Deposit Insurance Corporation, meaning that those people may either never see their money again or lose substantial amounts.

Silicon Valley Bank President Greg Becker himself pushed for weaker banking regulations, telling Congress to lift “enhanced prudential standards … given the low risk profile of our activities,” as The Lever reported

A chief culprit, economists say, is legislation President Donald Trump signed into law in 2018, which rolled back key parts of the Dodd-Frank banking regulations passed in the wake of the 2008 financial crisis. That 2018 legislation, called the Economic Growth, Regulatory Relief, and Consumer Protection Act, passed with strong support from the Republican Party and critical support from some Democrats. Among those leading the charge was McCarthy, then House majority leader.

“We’re going to move this Senate bill directly to the president’s desk to ensure these reforms help the economy to grow further by making community banks stronger,” McCarthy said of the legislation in 2018. “This is going to free up a great deal of capital and this will help a lot.”

Two former staffers for McCarthy are registered lobbyists for Silicon Valley Bank, according to the disclosures, one of whom lobbied on the Dodd-Frank repeal law that experts say made the current crisis more likely. 

Other Silicon Valley Bank lobbyists worked for political figures across both parties, including former President Bill Clinton; former Sen. Mike Enzi, R-Wy.; former Sen. Tom Coburn, R-Okla.; Rep. Joe Courtney, D-Conn.; former Sen. Arlen Specter, D-Pa.; and former Rep. Jay Inslee, now governor of Washington state. 

Brian Worth served as coalitions director for McCarthy from January 2011 to May 2014, when McCarthy was House Republican whip. Since March 2017 Worth has been a partner at the Franklin Square Group, where he’s worked as a lobbyist for Silicon Valley Bank. Wes McClelland served as a policy adviser and senior policy adviser for McCarthy from April 2011 to September 2015 and joined Franklin Square last January, where he has also lobbied on the bank’s behalf.

Franklin Square is the only lobby group that Silicon Valley Bank has used in over a decade and has lobbied on the bank’s behalf every year from 2009 to 2023. The only other lobby shops the bank has employed are DLA Piper from 2009 to 2010 and McGuireWoods from 2010 to 2011.

A spokesperson for McCarthy did not immediately respond to a request for comment.

Worth lobbied on the repeal law beginning on October 1, 2017, right up to its passage on May 24, 2018. Then, starting on July 1, 2018, Silicon Valley Bank began lobbying the FDIC — the very same federal agency responsible for insuring bank deposits and was tasked with implementing critical portions of Dodd-Frank. 

Though Franklin Square has lobbied on behalf of Silicon Valley Bank since 2009, the 2018 filing represents the first time it had ever lobbied the FDIC.

Beginning on April 20, 2022, McClelland also began lobbying the FDIC for Silicon Valley Bank, which both he and Worth continued right up until the bank’s last lobbying filing this year.

The lobbying disclosures do not provide any more detail about the work. Neither Worth nor McClelland immediately responded to requests for comment.

“This was a 100 percent avoidable problem,” economist Dean Baker told The Intercept in an email, pointing to the Dodd-Frank repeal bill. “That bill raised the asset threshold above which banks have to undergo stress tests from $50 billion to $250 billion. SVB would have been required to undergo regular stress tests before the revision; among the stresses you look at are sharp rises in interest rates, which is apparently what did in SVB. Presumably, if its books had been subject to this test, the risk would have been detected and they would have been required to raise more capital and/or shed deposits.”

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