WASHINGTON — The Senate Banking Committee is scheduled to hold its first hearing Tuesday on the collapse of Silicon Valley Bank and Signature Bank, presenting a list of major players in the 2024 election that will focus on how the government should respond to two of the biggest ones. bank failures in American history.
The hearing, led by Chairman Sherrod Brown, D-Ohio, will feature FDIC Chairman Martin Gruenberg, Federal Reserve Board of Governors Vice President for Supervision Michael Barr, and Assistant Secretary for Internal Finance of the Treasury Department, Nellie Liang.
“We are left with many questions, and much justified anger, toward bank executives and boards, venture capitalists, federal and state banking regulators, and policymakers,” Brown will say in his opening statement, according to prepared statements.
“While no taxpayer money is being used to bail out these depositors, I understand why many Americans are angry, even disgusted, at how quickly the government moved when an elite group in California demanded it,” Brown will continue. . «It’s because American workers haven’t seen threats to their paychecks and their livelihoods treated as the same level of emergency.»
Brown’s prepared remarks also cite the 2018 reversal of enhanced Dodd-Frank scrutiny for midsize banks like Silicon Valley Bank, a bill led by Republicans, backed by a faction of Democrats and signed by then-President Donald Trump. And he will ask regulators to «assess the damage,» impose accountability, and «fix what’s broken.»
The hearing is scheduled to begin at 10 am ET.
Republicans on the panel have put the emphasis on regulators, questioning whether they had more tools to prevent SVB from collapsing and why they failed to act to prevent it from reaching the brink.
“We need the regulations that are on the books to be enforced. The regulators failed here,” Sen. Katie Britt, R-Ala, said in an interview. “There were tons of red flags, and I want answers as to why they looked the other way. I mean, the pure indicators show that they didn’t do their job. So this is mismanagement on their part.»
“The tools were there and they were not used. I want to know why,» Britt added.
SVB’s collapse was followed by the bankruptcy of New York-based Signature Bank. In the weeks since, the banking sector has tried to restore confidence. A group of 11 financial institutions committed $30bn in deposits to help keep First Republic Bank afloat, while in Europe, UBS bought Credit Suisse for $3.2bn.
A spotlight on regulators
Barr, for his part, plans to describe “the unique nature of this bank” as part of the reason for its collapse, and to identify a series of problems that needed to be solved by bank managers, not Federal Reserve supervisors.
«The failure of SVB is a textbook case of mismanagement,» Barr will say, according to prepared testimonyfurther citing the bank’s «focused business model» on technology and venture capital, its rapid growth between 2019 and 2022, and its inability to «effectively manage interest rate risk» of its securities.
Barr will also mention the bank’s reliance on depositors who were «connected by a web of venture capital firms and other ties,» adding that «when the stress started, they essentially got their act together to create a run on the bank.» And he will say that regulators are looking into whether the 2018 deregulation law led to the failure of SVB.
The panel list is packed with major players in the 2024 election, presenting a wild card when it comes to congressional response.
Brown and Sen. Jon Tester of Montana are both Democrat-Republicans seeking re-election. Sen. Kyrsten Sinema, I-Ariz., has not said whether she will run for a second term. Sen. Steve Daines, R-Mont., chairs the campaign arm of the Republican Party in the Senate. And Ranking Member Tim Scott, RS.C., appears to be preparing to run for president.
The House will host its own hearing on the bank failures on Wednesday, and the same panel will appear before the Committee on Financial Services.
With no agreement on the cause of the bank failures, it is unclear if Congress will pass a new law to prevent more in the future. Republicans mostly blame regulators, while Democrats are split between some who support Sen. Elizabeth Warren, D-Massachusetts, legislation to restore rules that were repealed in 2018, and others who are reluctant to go there. .
Senate Majority Leader Dick Durbin, D-Ill., said Monday the house should act to reimpose that enhanced scrutiny on banks, noting that he voted against rolling back those regulations in 2018.
“I think I was right then,” he said. «And I think I am now.»