Bank Failures For All

Today in The Lever: Trump just granted his billionaire crypto/AI czar an ethics pass.

👇 Spend four minutes reading this 992-word newsletter to learn about: 

• Trump’s plan to jack up your interest rates.
• How traffic congestion pricing is freeing NYC.
• Crypto’s war on former government regulators.
• How California lawmakers are kowtowing to Big Tech.

🚕 Congestion pricing works. Just weeks after President Donald Trump said he plans to roll back New York City’s $9 toll for drivers entering Manhattan, a new study finds that congestion pricing is a booming success. Since January, drivers are moving on average 15 percent faster, cutting travel times within the city’s most congested areas by 8 percent — meaning New Yorkers are already spending less time in the car. No wonder auto lobbyists have spent thousands of dollars trying to curry favor with state officials.

🐔 Schumer chickens out. Days after personally delivering Republicans the funding they need to continue dismantling the federal government, Senate Democratic Leader Chuck Schumer refuses to face the public. Schumer was set to promote his new book Antisemitism in America: A Warning in several cities over the coming weeks, but postponed the tour amid alleged “security concerns” — and demands he step down from party leadership. 

🦸 Millionaires, assemble. The mayor of San Francisco has recruited an Avengers-style advisory team of ultrawealthy business leaders to help “revitalize” the city’s economy and downtown, including Sam Altman of OpenAI, Ruth Porat of Alphabet/Google, and Tony Xu of DoorDash. Meanwhile, in a similar stunt, California Gov. Gavin Newsom is sending prepaid burner phones programmed with his cell number to prominent Big Tech CEOs.

🏦 Bank Failures For All. Trump’s financial regulators have withdrawn a Biden-era rule closing a loophole that allowed banks to accept massive pools of risky money, known as brokered deposits. These deposits are often facilitated by third-party brokers — usually startups — that don’t face the same regulatory scrutiny as other financial institutions, exposing banks to greater losses. 

• Brokered deposits played a significant role in the numerous bank failures of 2023, most notably the collapse of Silicon Valley Bank and the ensuing bankruptcy of digital transaction firm Synapse, which erased more than $100 million in its customer’s uninsured deposits.

😳 Big Crypto wages revenge. Cryptocurrency firms are joining the Trump administration’s war on federal regulators and calling for a boycott of law firms that hire former government lawyers who tried to regulate the industry. That includes the Winklevoss twins — who are pressing Trump officials to fire and publicly name the government employees who probed their crypto platform Gemini — and Coinbase CEO Brian Armstrong, who said regulators committed ethics violations when they investigated crypto firms.

Zombie pipelines no more. As Trump works to undo safety protections for communities confronted with the risks of newly built carbon pipelines, South Dakota just passed a law banning the use of eminent domain for the construction of carbon dioxide pipelines, whose leaks have caused zombie-like symptoms in exposed residents. The new law throws a wrench in a planned $9 billion, 2,000-mile, for-profit pipeline project that would stretch across the Midwest.

Trump is helping banks jack up your prices. On the campaign trail, Trump promised to cap credit card interest rates at 10 percent. But since his inauguration, the federal agency that regulates banks has abandoned its support for a state law designed to reduce credit card interest rates, which now average 24 percent and cost American consumers $120 billion every year. 

The interest-rate loophole. At issue is a 1978 Supreme Court ruling permitting banks to export their home state’s light-touch lending regulations when doing business in states with stricter laws, such as interest-rate caps. Credit card companies and big banks moved their headquarters to Delaware, South Dakota, and Utah — which have no state interest-rate caps. But after the Supreme Court decision, Congress carved out an option for states to set their own interest-rate caps on all banks doing business within their borders. Iowa and Puerto Rico have successfully done so, capping interest rates at 32 percent. 

A fight over states’ rights. Colorado made a similar move in 2023. Fearing more states following Colorado’s lead, the financial industry filed a lawsuit. The Federal Deposit Insurance Corporation (FDIC) backed Colorado, but a Trump-appointed judge initially blocked the state’s new law. Upon appeal, Trump’s FDIC has now withdrawn the agency’s support, betraying Trump’s anti-interest rate campaign rhetoric, and dealing a blow to the state’s case at the Tenth Circuit Appeals Court. 

A bipartisan remedy. A new Oregon bill is following in Colorado’s footsteps, where the effort may face similar industry pushback. Congress could simply resolve this states’ rights issue — to the great benefit of consumers — by passing a federal limit on credit card interest rate hikes. Bipartisan legislation recently introduced in both the House and Senate would do just that, capping rates at 10 percent — and forcing Trump to decide whether to fulfill a promise he’s already intent on breaking.

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“Democrats think Chuck Schumer is not leading, but they are wrong. Plenty of Democratic Senators wanted to vote to help Trump, but didn’t have to, because Schumer gave them cover. That’s why no one is challenging him for leader. They are all Chuck Schumer.” — Matt Stoller, American Economic Liberties Project