There are a number of arguments as to whether these failures could have been prevented and addressed faster if the Dodd-Frank standards had still been in place. These standards were arguably designed to specifically prevent and address the type of circumstances that triggered these recent bank failures: multiple failures and contagion in the financial system, market panic, deposit runs and liquidity crisis.

For example, abiding by Living Wills and stress testing would have identified problems far earlier and potentially required these banks to address a number of potential red flags that constituted higher risk, such as:

Interest rate risk in the banks’ securities portfolio investments, and the consequences of liquidating those investments at a significant loss in the event of a cash crisis;

Lack of interest rate risk hedging strategies;

Excessive uninsured deposits that posed a risk to the bank if customers withdrew their money en masse; and

The need to hold higher-than-normal levels of money to address their risks.

Ironically, in taking steps to provide unprecedented deposit insurance coverage to uninsured deposits at these banks, the U.S. Treasury, the Fed and the FDIC issued a joint statement on March 12 that they were invoking the systemic risk exception which allowed them to replace depositors’ money, even though the law was changed in 2018 to make clear banks of their size no longer posed systemic risk.

This article is republished from The Conversation, an independent nonprofit news site dedicated to sharing ideas from academic experts. If you found it interesting, you could subscribe to our weekly newsletter.

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V. Gerard (Jerry) Comizio is a member of the Democratic party.