Banks fought to fend off tougher regulation. Then the meltdown came.

Three days before Silicon Valley Bank’s failure, big bank lobbyists and executives were triumphant. They had convinced key GOP lawmakers to publicly warn Federal Reserve Chair Jerome Powell against tightening regulations on the industry.

Now, the months-long campaign is in jeopardy.

The world’s attention is focused on whether the U.S. banking system is safe. And bank lobbyists believe the Fed may now be encouraged to press ahead with tougher rules that it was just beginning to discuss before the meltdown. Sen. Elizabeth Warren (D-Mass.) warned mere hours after Silicon Valley Bank’s collapse that “regulators must not buckle to pressure” in response to the bank lobbying barrage that had been underway.

“Clearly, Silicon Valley Bank’s failure will embolden people who see the current regulatory system as insufficient,” said Brookings Institution senior fellow Aaron Klein, a former Treasury Department official and Capitol Hill economist.

While the details of how the lender collapsed are still being sorted out, the political impact of the second-largest bank failure since 2008 “is the equivalent of a lake of water being dumped on the fire that seemed lit under some Republicans to pressure the Fed,” Klein said.

It’s one immediate way that Silicon Valley Bank’s meltdown is scrambling the banking industry’s Washington playbook and forcing it to rethink how it engages with Capitol Hill.

Bank lobbyists are now hoping the narrative focuses on other elements of the system that might have failed. At stake for the biggest lenders is whether they’ll be subject to the most significant strengthening of rules since the aftermath of the global financial crisis.

“SVB’s stunningly quick collapse should put an end to the nonstop attempts by banks, lobbyists and their political allies to weaken capital and other financial regulations that protect depositors, consumers, investors and financial stability,” said Dennis Kelleher, who advocates for tougher bank oversight as president and CEO of the nonprofit Better Markets.

The rules that the big bank lobby was focused on before SVB’s failure dealt with the capital funding buffers that lenders are required to maintain so they can absorb losses during downturns and spare taxpayers from having to bail them out.

The Fed and other bank regulators hiked capital requirements in the wake of the 2008 crash. In the last few months, a top official appointed by President Joe Biden — Fed Vice Chair for Supervision Michael Barr — kicked off a “holistic review” of capital rules that were put in place over the last decade and suggested lenders should be subject to higher requirements.

Barr’s review rattled large banks. And so their main trade groups — the Bank Policy Institute, which counts SVB as a member, the Financial Services Forum and the Securities Industry and Financial Markets Association — mounted a campaign to argue that hiking capital requirements would be a drag on the economy. They churned out explainers challenging Barr’s assumptions, and executives made direct pleas to lawmakers who handle oversight of the Fed and other regulators.

“In response to higher capital requirements, banks have two choices,” JPMorgan Chase CFO Jeremy Barnum said at a March 1 Washington symposium the Bank Policy Institute held to showcase the bank capital debate. “We can charge higher prices or we can do less lending. Both of those choices are ultimately bad for consumers and businesses.”

The lobbying bore fruit last week when Powell testified before the House and Senate. Over his two days of testimony, a parade of lawmakers — mostly Republican — warned him about raising capital requirements and urged him to rein in Barr.

"Capital and its quality must be continually scrutinized," Sen. Tim Scott of South Carolina, the top Republican on the Senate Banking Committee, said at Powell’s March 7 hearing. "But increased capital does not necessarily provide an increased benefit."

That opening salvo suggested that “the banking industry may be on solid footing to battle against the worst-case scenario,” analysts with the investment bank BTIG told clients in a note after the hearings.

Then on Friday, regulators rushed to rescue SVB, and lobbyists began panicking that their push on capital might be in trouble. Critics immediately connected the dots.

“Wall Street lobbyists and Republicans in Congress are pushing Fed Chair Powell for weak capital requirements at exactly the wrong time,” Warren said on Twitter Friday afternoon. “Silicon Valley Bank's collapse underscores the need for strong rules to protect the financial system. Regulators must not buckle to pressure.”

Former Fed Governor Daniel Tarullo, who led the central bank’s regulatory policy in the Obama administration, said in an interview Sunday that the Fed’s regulatory review should revisit rules for large regional banks. He pointed to a recent Fed policy change that allowed such lenders to escape tougher rules when they hold securities that have dropped in value — the exact issue that sparked SVB’s death spiral.

“It’s a question,” he said. “It’s not an answer.”

Some industry advocates are now hoping that the narrative coming out of the SVB failure focuses on faults at the Fed and other elements of bank regulation that were eased under the Trump administration.

“I'm sure somebody will find a way to say that this means that [global systemically important banks] should hold more capital, but it's pretty hard to see that right now,” said one industry representative granted anonymity to talk candidly about the fallout. “Politics will find a way but the cogent argument is on the other side.”

To be sure, the Fed is facing growing scrutiny of how it supervised SVB and what it might have missed in ongoing oversight by bank examiners, beyond specific rules. SVB was regulated by officials from the Federal Reserve Board of Governors in Washington as well as the regional Federal Reserve Bank of San Francisco.

Tarullo, who led Fed regulatory efforts after the 2008 crisis, said he has been worried about the central bank’s supervision of the industry “for quite a while.” His Trump-appointed successor and Barr’s predecessor, Randal Quarles, advocated for a lighter supervisory touch.

“There’s clearly a supervisory gap there, and for me the question is, does the gap originate at the on-the-ground supervisors, or does it originate in the instructions they were operating under?” Tarullo said. “Did the supervisors feel inhibited?”

“What’s really at issue here isn’t the rules,” said Federal Financial Analytics managing partner Karen Petrou, who advises bankers and others on policy. “It’s how they were enforced by supervisors clearly asleep at the wheel because they thought they had a safe, self-driving car.”

Victoria Guida and Sam Sutton contributed to this report.