U.S. Senators demand answers from Fed about California bank failure
Fri, Mar 17, 2023 2:45 PM
By by Cameron Arcand, The Center Square
A bipartisan group of senators is demanding answers about what led to the collapse of Silicon Valley Bank and what knowledge the federal government may have had about it beforehand.
Sen. Kyrsten Sinema, I-Ariz., and Sen. Thom Tillis, R-N.C., along with numerous other Republican and Democrat senators, said in a letter to Federal Reserve Vice Chair Michael Barr that they are “deeply concerned that regulators may have missed clear warning signs in the lead up to the failure of SVB.”
“It is gravely concerning that retail participants, utilizing only publicly available information, were able to identify clear and compelling examples of financial mismanagement and asset over-concentration at SVB, while the Fed, which can draw even deeper from non-public supervisory information, was unable to ascertain a similar conclusion,” the letter states.
“The fact that the San Francisco Fed, among other regulatory agencies, found no reason to take appropriate regulatory action or even investigate SVB further in the months, weeks, and days prior to the bank’s collapse must be addressed in a manner that restores public confidence in Fed supervision,” they continue.
Silicon Valley Bank failed last week, which resulted in the Federal Deposit Insurance Corporation stepping in to help depositors. The bank was known for supporting the technology sector, and New York officials also decided to shut down Signature Bank shortly afterward. First Republic Bank is also struggling and using other financial institutions for assistance.
“The Fed should review the financing arrangements between SVB and its customers to determine their impact on the bank’s collapse. Allowing such a high concentration of these rate-sensitive customers with primarily uninsured deposits at any single bank strikes us as a compelling risk to the stability of the bank, the banking system, and to taxpayers writ-large that merits further inquiry,” the letter adds.
It’s unclear if other banks will fail soon, but the White House is trying to reassure Americans that they will likely not be impacted.
“Americans can rest assured that our banking system is safe,” Biden said on Monday. “Your deposits are safe.”
There is also legislation backed by Democrats looking to tax bonuses and require profits from stock sales by bank executives that oversaw a failure to be turned over in order to support the FDIC, The Center Square reported.