Collapsed Silicon Valley Bank enlisted ‘revolving door’ lobbyists to push its policy agenda in Washington • OpenSecrets
March 12-18 is Sunshine Week, an annual celebration aimed at promoting transparency. This story is part of a series highlighting OpenSecrets’ work to shine a light on key areas related to money in politics at the state and federal level.
Every federal lobbyist that has registered to work on behalf of Silicon Valley Bank, which collapsed Friday in the largest U.S. bank failure since the 2008 financial crisis, swung through the so-called “revolving door” between the federal government and private sector, a new OpenSecrets analysis of federal lobbying disclosures found.
Silicon Valley Bank first hired federal lobbying firms DLA Piper and Franklin Square Group in 2009. While the bank worked with federal lobbyists at DLA Piper through 2010 and McGuireWoods from 2010 to 2011, Franklin Square Group has been the sole lobbying firm registered on behalf of Silicon Valley Bank since 2011.
All seven of Silicon Valley Bank’s registered lobbyists in 2022 previously held jobs in the government responsible for overseeing and regulating financial institutions, according to OpenSecrets data, and all are or were partners at Franklin Square Group.
Franklin Square Group has reported receiving more than $1.9 million from Silicon Valley Bank since 2009. Silicon Valley Bank — and other big banks — ramped up lobbying efforts to weaken banking regulations enacted after the 2008 financial crisis by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Franklin Square Group did not return OpenSecrets’ request for comment.
Silicon Valley Bank’s demise was the second-largest bank collapse in American history. The bank housed the funds of some of the most powerful tech investors in the world, and more than 90% of Silicon Valley Bank deposits were not insured because they exceeded the $250,000 amount guaranteed by the Federal Deposit Insurance Corporation.
Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome “Jay” Powell and FDIC Chair Martin Gruenberg announced Sunday that all Silicon Valley Bank deposits would be “fully protected,” regardless of whether they were insured.
Silicon Valley Bank’s revolving door lobbyists spent the months leading up to the collapse pushing back on a proposal that would require financial institutions to increase payments to the FDIC’s Deposit Insurance Fund, The Lever reported.
Federal regulators also dissolved Signature Bank, a New York-based bank that recently went after high-risk cryptocurrency deposits, on Sunday in an effort to contain fallout from Friday’s collapse. They announced all debtors of Signature Bank would be “made whole.”
Yellen ruled out a bailout like the one following the 2008 financial crisis and pledged taxpayers would not bear the burden of the deposits. President Joe Biden assured the American people Monday that “the banking system is safe” following the collapse of Silicon Valley Bank and Signature Bank.
Loaded revolvers shoot down key banking regulations
Years of lobbying to weaken banking regulations enacted by the Dodd-Frank Act following the 2008 financial crisis preceded the Silicon Valley Bank collapse. Dodd-Frank introduced key stress tests for banks, starting with those with more than $50 billion in assets, and other provisions that big banks lobbied for years to undermine.
“No one should be mistaken about what unfolded over the past few days in the U.S. banking system: These recent bank failures are the direct result of leaders in Washington weakening the financial rules,” Sen. Elizabeth Warren (D-Mass.) wrote in an op-ed for The New York Times.
Congress rolled back key bank regulations in the Economic Growth, Regulatory Relief, and Consumer Protection Act signed into law by former President Donald Trump in 2018. The law extended regulatory breaks to banks the size of Silicon Valley Bank, more than $50 billion but less than $100 billion, as of 2018.
“Unfortunately, the last administration rolled back some of these requirements,” Biden said in his Monday address. “I’m going to ask Congress and the banking regulators to strengthen the rules for banks to make it less likely that this kind of bank failure will happen again and to protect American jobs and small businesses.”
But key Democrats joined Republicans in supporting the Economic Growth, Regulatory Relief, and Consumer Protection Act in 2018. One lead supporter was current House Speaker Kevin McCarthy (R-Calif.).
“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. This is going to free up a great deal of capital and this will help a lot,” McCarthy said at the time.
Two Franklin Square Group partners registered to lobby on behalf of Silicon Valley in 2022 were former senior aides to McCarthy, The Intercept reported. One of those former aides is Brian Worth, McCarthy’s former director of coalitions from 2011 to 2014. Worth was one of the lobbyists hired by Silicon Valley Bank in 2018, and Worth was part of the team that lobbied Congress, the White House, the Treasury Department, the Securities and Exchange Commission and the Commodity Futures Trading Commission on banking regulation rollbacks in the 2018 legislation.
A McCarthy spokesperson did not return OpenSecrets’ request for comment.
Wes McClelland was a senior policy advisor to McCarthy from 2011 to 2015. The Franklin Square Group partner registered to lobby on behalf of Silicon Valley Bank in 2022, so he wasn’t part of the firm’s efforts to lobby on the Economic Growth, Regulatory Relief, and Consumer Protection Act in 2018.
But since joining Franklin Square Group, McClelland has lobbied the FDIC and Congress on “banking issues related to innovation and technology.” The lobbying firm representing Silicon Valley Bank argued in 2022 that the risk of bank failures is low, The Lever reported, and insisted that requiring banks to pay more money to the FDIC’s Deposit Insurance Fund would harm the financial institution’s bottom line.
From 2006 to 2011, McClelland served as senior policy advisor to former Rep. John Campbell (R-Calif.), where he was the primary staffer to the House Financial Services Committee during the 2008 financial crisis and the crafting of the Dodd-Frank Act — experience touted in a press release issued by the Franklin Square Group when McClelland joined as partner.
Neither Worth nor McClelland returned requests for comment from OpenSecrets.
Other Franklin Square Group partners boasted impressive resumes featuring experience with key federal lawmakers and congressional committees, including the Senate Judiciary Committee, the House Energy and Commerce Committee, Rep. Marc Veasy (D-Texas) and former Rep. Jay Inslee (D-Wash.), the current governor of Washington state.
House Financial Services Committee Ranking Member Maxine Waters (D-Calif.) told POLITICO that she and Chair Patrick McHenry (R-N.C.) “are planning to have a hearing as soon as possible.” McHenry did not comment, but said he’s confident federal regulators will “do the right thing,” a more supportive stance as some fellow Republicans have blasted the Biden administration for its decision to insure depositors.
In the meantime, the FDIC is planning another Silicon Valley Bank auction after a failed attempt to find a buyer on Sunday.
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