WASHINGTON  — It appeared like a great thought at the time: red-state Democrats confronting bleak reelection prospects would connect strengths with Republicans to slice bank regulations—demonstrating an eagerness to work with President Donald Trump while bucking numerous in their party.  That unlikely coalition voted in 2018 to undo some of a comprehensive 2010 law designed to avert another financial crisis.

The recent failures of Silicon Valley Bank and Signature Bank, which necessitated a federal rescue, and the subsequent increase in concern over a wider banking contagion are now being attributed to those changes. The rollback was aided by a lobbying effort that cost tens of millions of dollars, attracted hundreds of lobbyists, and received generous campaign contributions.

The recent failure of two statewide Washington-area banks has brought to light the influence of the banking sector, which spends heavily to fight regulation and frequently employs former members of Congress and their staff to argue that they are not a threat to the economy. The Justice Department and the Securities and Exchange Commission have both launched investigations after President Joe Biden requested that Congress grant him the authority to impose harsher sanctions on failing banks. Democrats in Congress are advocating for additional regulations on financial institutions.

The 2010 Dodd-Frank law placed strict regulations on banks to reduce consumer risk and force them to adopt safer lending and investing practices. The banking lobby worked for two years to weaken certain parts of the law. Sen. Mike Crapo hoped that a more focused approach would garner enough support from moderate Democrats to overcome the 60-vote filibuster threshold. The Republicans had long sought to mitigate the effects of Dodd-Frank. However, there is currently no sign of another bipartisan coalition emerging in Congress to reinstate stricter regulations, highlighting the continued influence of the banking sector.

Crapo discussed the idea with Democratic Senators Mark Warner of Virginia, Jon Tester of Montana, Joe Donnelly of Indiana, and Heidi Heitkamp of North Dakota. By the fall of that year, the bipartisan group had established regular meetings and developed a lobbying strategy. In 2017 and 2018, businesses and trade associations spent more than $400 million on lobbying. The bill was promoted to the general public as a form of regulatory relief for community banks that served farmers and small businesses but were understaffed. Community bankers from all over the country flew to Washington to meet with legislators on numerous occasions. Tester met with Montana bank officials 32 times. When the congressional delegation arrived home, local bank executives pushed them.

The 2018 Senate rollback bill lowered the bar for banks subject to a rigorous oversight regime that included required financial stress testing. However, it also contained provisions that drastically reduced oversight, which was requested by midsize banks. This part of the bill has drawn attention because Silicon Valley Bank and Signature Bank, whose executives lobbied in favor of it, failed. Heitkamp, Tester, and Donnelly received the most money from the banking sector in the Senate during the 2018 campaign season as compensation, according to OpenSecrets.

The bill, which divided the Democratic caucus, was made available for voting by Democratic Senate Leader Chuck Schumer. While Tester huddled with executives from Bank of America, Citigroup, Discover, and Wells Fargo, Heitkamp spoke on the chamber floor in support of the bill. Later, the American Bankers Association spent $125,000 on an advertising campaign to express its gratitude to Tester for his part in the bill's passage. Additionally, Tester met with Greg Becker, the CEO of the now-defunct Silicon Valley Bank, to urge Congress and the Federal Reserve to be more lenient with banks of his size in terms of regulation. The Franklin Square Group's lobbyists contributed $10,800 to Tester's campaign.

Heitkamp was the only member of the group invited to the bill signing ceremony, beaming alongside Trump. Americans for Prosperity, the grassroots conservative group funded by the billionaire industrialist Koch brothers, ran an online ad congratulating Heitkamp for taking a stand against her party. Heitkamp pushed back against suggestions that the legislation was directly responsible for the collapse of Silicon Valley Bank, but acknowledged that new rules put in place by the Fed after the measure was signed into law could have played a role. Tester pledged to take on anyone in Washington to ensure that executives at these banks and regulators are held accountable.

The bill was a good piece of legislation that provided desperately needed relief to struggling community banks, according to Cam Fine, who served as the trade group's leader during the legislative push for the Independent Community Bankers of America. The final passage, though, was dependent on backing from a large coalition of interests, including Wall Street and midsize banks. Only Tester won reelection out of the many moderate Democrats who supported the measure. Tester was in Silicon Valley for a fundraiser and will run for office again in 2024. Silicon Valley Bank's partner at a law firm was one of the event's sponsors.