America's Top Financial Cop Just Lied To Congress
If Gary Gensler's hatred of crypto wasn't obvious before, it is now
This week featured crypto’s most pivotal 48 hours in (American) history.
I say that because America’s top financial cop — Securities and Exchange Commission Chair Gary Gensler — was testifying before Congress about crypto. I did not expect him to lie about crypto.
And yet, based on testimony from one of New York’s top financial regulators that followed less than 24 hours later in front of the same House Financial Services committee, it appears that Chair Gensler either lied, or knowingly and extremely disingenuously, misrepresented facts to Congress.
As I’ve also covered in prior newsletters during the banking collapses in March that took down Silicon Valley Bank, Signature, and Silvergate, there were a number of factors at play.
The first bank to go down (Silvergate) certainly did have a large concentration of crypto clients, and decided to close up shop and return depositor money when it ran into trouble. The second bank to go down (Silicon Valley Bank) faced a different issue entirely. They had a concentration of startups that all yanked their deposits at the same time, and failed because of that bank run. The third bank to go down (Signature) had both issues. Sure, it had a few crypto clients that made up about 20% of its base, but it also had a huge focus on real estate and other businesses.
That’s why it was particularly strange when it got closed by regulators on a Sunday — right before emergency actions taken by the Fed were slated to kick in to help banks like Signature. Furthermore, things were then made even stranger when Signature board member and former Congressman Barney Frank came out and said they were only closed down because the government wanted to make an example out of a bank that was banking crypto companies. (This was later confirmed by the Wall Street Journal.)
But this week, SEC Chair Gary Gensler doubled down. He specifically said that crypto played a role in taking down Signature Bank. He also specifically linked all three of these failures together as examples that crypto is dangerous, despite the fact that Silicon Valley Bank’s collapse had nothing to do with crypto.
“It’s interesting how this all had some crypto narrative as well,” he said on Tuesday.
Less than 24 hours later, America would hear testimony from New York Department of Financial Services Superintendent Adrienne Harris, who directly refuted Chair Gensler’s testimony.
“It is not the case that the failure of Signature [Bank] was related to crypto,” she said Wednesday.
She also pointed out that crypto-related depositors withdrew funds from the bank in exact proportion to clients in other fields, such as law firms and food vendors.
So why is the head of America’s most important financial regulator continuing to lie to Congress and the American people?