In response to the sudden collapse of Silicon Valley Bank and Signature Bank, bills were introduced and hearings were scheduled in Congress. Lawmakers are speaking out and casting blame as they seek to address the fallout from these failures. Here is a closer look at what they are saying and planning.
President Joe Biden urged Congress on Monday to tighten the regulations on banks to prevent future failures. However, there is a division among lawmakers on whether legislation is necessary. Some leaders in Congress doubt that a closely divided Congress will take any action. Senator Sherrod Brown, the chairman of the Senate Banking, Housing, and Urban Affairs Committee, stated that although some bills may be proposed, it is unlikely that anything significant will be passed due to the influence that banks hold over Republican members of Congress.
According to Republicans’ statement as the BNN world news, the existing laws were enough to prevent bank failures, but regulators failed to identify obvious problems and guide the banks to mitigate their risks.
Senator John Thune of South Dakota, the second-ranking Republican, said, “If there are suggestions, we would consider them at some point, but I think it’s premature to talk about solutions before we identify the problem and obtain answers from regulators about why they were not vigilant.”
What is the next move?
Lawmakers on the House Financial Services Committee have scheduled their first hearing on March 29 to examine the bank failures. The hearing will include at least two witnesses, Martin Gruenberg, Chairman of the Federal Deposit Insurance Corp.’s board of directors, and Michael Barr, Vice Chair for Supervision with the Federal Reserve’s board of governors. The committee has vowed to conduct the hearing impartially and to seek the answers that the American people deserve.
Senator Sherrod Brown, the chairman of the Senate Banking, Housing, and Urban Affairs Committee, announced that his committee will also hold a hearing soon to investigate the bank failures. He indicated that the first hearing would likely focus on inviting witnesses responsible for regulating the failed banks, with the Federal Reserve Board and the Federal Deposit Insurance Corp. (FDIC) taking the lead.
The FDIC was the primary federal regulator for Signature Bank in New York, while the Fed board was the primary regulator for Silicon Valley Bank in California. The purpose of the hearing is to identify what went wrong and prevent similar failures in the future.
In a letter on Thursday, Brown outlined some of the questions that lawmakers may ask regulators during their upcoming hearing, such as the impact of social media-led coordination among customers, the role of uninsured deposits at Silicon Valley Bank, and regulatory gaps in capital, liquidity, and stress testing that may have contributed to the bank failures.
Meanwhile, Sen. Bill Hagerty, R-Tenn., is seeking answers as to why regulators did not act on reports of liquidity risks at Silicon Valley Bank and why the FDIC did not auction off the remaining parts of the bank.
Senators from both parties are raising questions for regulators following the recent bank failures. Sen. Sherrod Brown, D-Ohio, has requested regulators to undertake a comprehensive review of what led to the failures. Brown has also highlighted several key questions, including the role of social media-led coordination among customers and the regulatory gaps regarding capital, liquidity, and stress testing. Meanwhile, Sen. Bill Hagerty, R-Tenn., is questioning why regulators failed to act on detailed reports of liquidity risk at Silicon Valley Bank and why the FDIC didn’t auction off the bank’s remaining parts.
Other senators have raised specific concerns. Sen. Cynthia Lummis, R-Wyo., wants to know if regulators plan to use Signature Bank’s failure as an opportunity to tighten regulations on cryptocurrency. Signature Bank had been a go-to bank for the crypto industry and offered a blockchain-based digital payment platform. Sen. John Kennedy, R-La., is questioning how private stock analysts warned about potential problems at Silicon Valley Bank but regulators seemed to be unaware.
Banks that have assets worth less than $100 billion were granted an automatic exemption from the increased regulation. For banks within the $100 billion to $250 billion range, the Federal Reserve was given the power to determine whether enhanced oversight was necessary on a case-by-case basis. BNN world news has found both Silicon Valley Bank and Signature Bank fell under this category.