US Senator Elizabeth Warren addresses the general public during a rally to protest the US Supreme Courts overturning of Roe Vs. Wade on the Massachusetts State House in Boston, Massachusetts on June 24, 2022.
Joseph Prezioso | AFP | Getty Images
WASHINGTON — Sen. Elizabeth Warren on Tuesday pushed Fed Chair Jerome Powell to remove himself from the central bank’s review of the Silicon Valley Bank collapse, accusing him of allowing dangerous practices that helped to cause its failure.
The Massachusetts Democrat contended Powell’s “actions to permit big banks like Silicon Valley Bank to spice up their profits by loading up on risk directly contributed to those bank failures.”
“For the Fed’s inquiry to have credibility, Powell must publicly and immediately recuse himself from this internal review,” Warren said in a press release. “It’s appropriate for Vice Chair for Supervision Barr to have the independence mandatory to do his job.”
The Fed declined to comment to CNBC.
The Consumed Monday announced a review of the supervision and regulation of SVB after its takeover by financial regulators prompted the most important bank failure for the reason that 2008 financial crisis.
“The events surrounding Silicon Valley Bank demand an intensive, transparent, and swift review by the Federal Reserve,” Powell said in a press release Monday.
SVB, a 40-year-old institution that catered to tech startups and enterprise capitalists, shuttered on Friday after the Federal Deposit Insurance Corporation took control of its deposits.
On Wednesday, the bank announced it had sold $21 billion value of its securities at an almost $2 billion loss and said it needed to lift $2.25 billion to proceed operating. The bank’s stock price plummeted greater than 60% after the announcement, as customers began withdrawing their money.
Federal regulators, including the Treasury Department, announced Sunday that they’d backstop bank depositors through FDIC insurance. The agency created the Deposit Insurance National Bank of Santa Clara to carry the insured deposits from SVB.
Market analysts have said that regulators did not acknowledge SVB’s dangerous business practices, which relied heavily on corporate deposits over retail. It also held a big share of asset loans and securities.
SVB’s collapse has fueled fears of comparable issues at other banks.
On Sunday, Latest York State regulators shut down Signature Bank, a serious lender within the cryptocurrency industry, to assist stave off an even bigger financial crisis. As with SVB, all deposits are protected by the Fed’s emergency lending authority.
Treasury Secretary Janet Yellen said Friday she was “monitoring very fastidiously” developments at a number of banks. Her testimony before the House Ways and Means Committee got here before the FDIC announcement.