Barney Frank, the former congressman from Massachusetts who helped write the Dodd-Frank Act — the legislation passed in the wake of the 2008 financial crisis with the intention of shielding the economy from a similar crisis — said on Monday he was disappointed in the decision of regulators to shut down Signature Bank on Sunday, where he had been a board member since 2015.
Mr. Frank said in an interview on Monday that the bank’s failure had come as a shock to him, because its situation seemed to have stabilized by Sunday. Regulators, he believed, took control of Signature to send a message to other banks to stay away from cryptocurrencies.
“They shoot one man to encourage the others,” Mr. Frank said, referring to an adage about using a single military execution as an incentive for the subject’s peers to behave differently that he thought applied to the regulators’ handling of Signature. “I think we were shot to encourage the others to stay away from crypto.”
Signature, which took deposits from digital asset companies, was known as a crypto-friendly bank, even though it did not directly deal with cryptocurrency assets.
But Mr. Frank’s interest in the bank related to its focus on making loans to developers building affordable housing and accessing the federal low income housing tax credit, a system that Mr. Frank championed during his time in Congress.
“What had attracted me to it, and still does, is its role as a multifamily housing lender,” he said.
During the 2008 financial crisis, Mr. Frank helped establish the short-term rescue plan, and later co-wrote the Dodd-Frank Act, which toughened the regulatory rules put in place to prevent the nation’s biggest banks from engaging in risky behavior.