Yahoo Finance political columnist Rick Newman joins the Live show to talk about potential changes in policy following recent bank collapses.

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LEARN MORE ABOUT: Bank Failures

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The recent failures of Silicon Valley Bank (SVB) and Signature Bank have prompted the Biden administration to propose stricter banking regulations. These banks, which cater to tech and startup companies, have faced significant losses due to their risky lending practices.

SVB, for instance, loaned a significant amount of money to the now-collapsed hedge fund Archegos Capital Management. Similarly, Signature Bank provided funding to the troubled lender Greensill Capital, which filed for insolvency earlier this year.

The failures of these banks have raised serious concerns about the stability and resilience of the financial system. In response, the Biden administration has proposed several measures aimed at preventing similar incidents in the future.

One of the most significant proposals is the creation of a new agency, the Consumer Financial Protection Bureau (CFPB), which will have the authority to regulate and oversee the banking industry more closely. This agency will have the power to investigate and penalize banks for unethical or risky lending practices.

Additionally, the administration wants to increase the capital requirements for banks, which would ensure that they have enough cash on hand to cover potential losses. This would be a significant departure from the current system, which allows banks to make risky loans with very little cash on hand.

The administration is also considering tighter restrictions on the use of derivatives, which are complex financial instruments that have been implicated in many financial crises in the past. These restrictions would ensure that banks are not taking on undue risks when they engage in derivative trading.

Overall, the Biden administration’s proposed measures represent a significant shift in the regulatory landscape for the banking industry. While these measures are likely to face opposition from some quarters, they are seen as necessary to prevent future banking failures and maintain the stability of the financial system.

In conclusion, the recent failures of SVB and Signature Bank have highlighted the need for stronger regulation in the banking industry. The Biden administration’s proposed measures, including the creation of the CFPB and increased capital requirements, are aimed at preventing similar incidents in the future. While these proposals are likely to be controversial, they are a necessary step towards ensuring the stability of the financial system.