Republican lawmakers accuse the Fed of slacking off before bank failure

Republican lawmakers on Wednesday accused top banking regulators of slacking off as Silicon Valley Bank plunged into the second-biggest bank failure in US history and questioned whether tougher regulations would have made a difference.

Regulators closed the bank on March 10, shaking the US financial system and raising fears of a broader banking crisis. But Fed supervisors first raised questions about Silicon Valley’s risky practices much earlier, in 2021, and warned bank management about them in the fall of that year.

“That doesn’t seem like a very urgent oversight process,” Rep. French Hill, an Arkansas Republican, said at Wednesday’s House Financial Services Committee hearing on the collapse of Silicon Valley Bank and Signature Bank, based in New York in March. 12. The Signature Bank collapse was the third largest in the nation’s history.

In response to the crisis, some Democrats are calling for tougher banking regulations. Specifically, they want to repeal a law, championed by the Trump administration five years ago, that struck down the toughest regulations at all but the largest banks, those with assets of more than $250 billion.

The 2018 law allowed the Fed to apply stricter supervision on a case-by-case basis to banks with assets between $100 billion and $250 billion, a category that included both Silicon Valley Bank and Signature Bank. The Fed official who oversees bank regulation, Michael Barr, agreed Wednesday that the Fed had had “substantial discretion” in dealing with Silicon Valley Bank.

The Fed is conducting its own review of its supervision of Silicon Valley Bank, which expires on May 1. Barr said the review would look at why Fed officials were unable to fix the problems before the bank failed.

Before enacting tough new regulations for banks, said Rep. Blaine Luetkemeyer, R-Missouri, “How about we first enforce the existing ones?”

Connect with the Voice of America! Subscribe to our channel Youtube and activate notifications, or follow us on social networks: Facebook, Twitter and Instagram.