House lawmakers tore into top U.S. bank regulators Wednesday, questioning their competency and saying examiners were asleep on the wheel, at a second day of congressional hearings this week about how Silicon Valley Bank and Signature Bank collapsed practically overnight on March 10 and March 12.
“We’d like competent financial supervisors, but Congress cannot legislate competence,” House Financial Services chairman Rep. Patrick McHenry, R-N.C., told top officials on the Federal Reserve, Treasury and FDIC originally the hearing.
The committee’s rating member, Rep. Maxine Waters, D-Calif., questioned whether the repeated warnings regulators delivered to SVB about its balance sheet and long-term interest risks were sufficient.
“The sunshine touch cautions from the Fed to SVB management are clearly not what Congress intended for bank supervision,” said Waters.
McHenry slammed the panel for an absence of transparency over that fateful weekend when the three regulators swiftly arranged backup financing to make sure depositors on the two banks would not lose any money of their collapse.
There aren’t any notes publicly available from regulators’ emergency meetings the weekend the banks collapsed, McHenry said. “That lack of transparency has a negative effect on the general public view of the security of the financial arena,” he added.
The query of what records could be given to Congress got here up repeatedly within the contentious hearing.
Rep. Brad Sherman, D-Calif., requested a broad survey of banks which can be undercapitalized the identical way SVB was.
“Are there any banks on the market, and roughly what number of, which have capital of under 5% should you subtract from their stated capital from their unhedged, unrealized losses on long run debt?” Sherman asked the regulators.
“Allow us to get back to you on that,” said Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation. “We’ll get the numbers and share them with you in a short time.”
Republican Rep. Bill Huizenga, Mich., demanded raw, confidential supervisory information in regards to the banks, available to regulators ahead of the collapses.
Gruenberg didn’t agree explicitly to supply confidential information, as an alternative suggesting the committee would want to issue a subpoena for this information. “I feel you’ve gotten the authority to compel that information,” he said, “and [FDIC] will probably be attentive to you.”
Members of the Republican majority House challenged a lot of the selections made by regulators within the hours and days after SVB collapsed and Signature Bank followed 48 hours later. Chief amongst these was what regulators did, or didn’t do, within the three days from the time they each learned of SVB’s looming collapse, on Thursday to Sunday, after they decided that the failures of SVB and Signature Bank posed a systemic risk to the economic system.
“Despite U.S. regulators having clear knowledge of insufficient risk management, it seems the examiners and your supervisors were asleep on the wheel while signs that Silicon Valley Bank was heading towards a collapse were staring them right within the face for a lot of, many months,” Rep. Ann Wagner, R-Mo., said to Federal Reserve Vice Chair Michael Barr.
On Tuesday, bank stocks turned negative following an analogous hearing before the Senate Banking Committee. Investors could have been spooked by the three top regulators each saying they favored more stringent rules for banks with greater than $100 billion in assets.
Nellie Liang, undersecretary for domestic finance on the Treasury Department, is testifying alongside Gruenberg and Barr before the House committee after appearing Tuesday before the Senate Banking Committee.
It is a developing news story, and will probably be updated throughout the hearing.
