US Senator Elizabeth Warren alleges Signature Bank failed because it “engaged in its get-rich-quick narrative” and “accepted crypto clients with insufficient collateral.” Emphasizing that the bank took “excessive risk,” the senator demanded answers from Signature Bank’s CEO regarding “the economically disastrous results it created.”
Letter from Senator Elizabeth Warren to the CEO of Signature Bank
US Senator Elizabeth Warren (D-MA) blamed Signature Bank’s failure on its acceptance of crypto clients without having sufficient collateral, Yahoo Finance reported Thursday. Signature Bank was seized by the New York State Department of Financial Services last Sunday, making it the third largest bank in the US to fail.
In a letter to Signature Bank CEO Joseph DePaolo, Senator Warren wrote:
He owes his clients and the public an explanation for the financially disastrous results he produced: He worked hard to weaken the rules, promised they would “bode well” for his bank, and then destroyed it with poor decision-making and assumption. of excessive risks. .
“Congress and the public must learn the lessons of Signature Bank’s failure,” the senator emphasized.
The lawmaker argued that Signature Bank supported efforts to reduce capital requirements under the Dodd-Frank Wall Street Reform Act, the publication conveyed, adding that the bank also directed thousands of dollars in campaign contributions to the leaders of the efforts to relax banking regulation in Congress.
“Despite assurances given to Congress that midsize banks like Signature Bank could manage risk independently, it has since become clear that your bank was by no means equipped to do so, and that the failure resulted in the closure of the bank and take control. by government regulators,” the senator told DePaolo.
Signature Bank Allegedly ‘Accepted Crypto Clients With Insufficient Collateral’
Senator Warren further alleged that Signature Bank took on “excessive risk” to improve its results by serving crypto clients, such as Coinbase, blockchain infrastructure platform Paxos, and crashed crypto exchange FTX. By December last year, crypto clients accounted for around 30% of Signature Bank’s total deposits. Warren stated:
Signature Bank accepted their get-rich-quick narrative… Signature Bank fell short because they embraced crypto clients with insufficient collateral.
According to Bloomberg, the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) were already investigating Signature Bank’s work with cryptocurrency clients before regulators took possession of the bank last Sunday. The news outlet noted that the DOJ was focusing on whether the bank had taken appropriate steps to identify potential money laundering activity by its clients.
What do you think about Senator Elizabeth Warren claiming that Signature Bank collapsed because it embraced crypto customers without proper collateral? Let us know in the comments section.
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