Senator Elizabeth Warren on Sunday called for a Federal Reserve inquiry into weakening the regulatory process, saying Silicon Valley Bank and Signature Bank imploded.
The demand from Massachusetts Democrats who are members of the Senate Banking Committee is that, according to new research, depositors hold the majority of their assets in banks, so if depositors run out of their holdings, they will not be able to invest in other banks. About 200 US banks were found to be at risk of failure. Interest rate sensitive financial instruments such as government bonds and mortgage-backed securities.
SVB and Signature, the 16th largest banks in the U.S., had invested their deposits in long-term mortgage-backed securities and bonds with low interest rates and high yields during the pandemic, but the value of assets surged when the Fed hiked rates. I just saw it drop to rate at the beginning of the month.
Let me explain what I see as the problem. Starting around 2016, multi-billion dollar banks like SBV kept coming to Washington and saying, “Please deregulate us.” We are like a tiny little bank, so please relax the regulations.
“Then Donald Trump ran for president and promised to deregulate these billion-dollar banks. ”
Warren said Congress will Rollback of bipartisan regulation “What happened is what we should have expected.”
“These banks … took risks, increased short-term profits, gave themselves huge bonuses and salaries, and exploded the banks,” the senator said.
Warren called for an independent investigation of the Fed and “the entire regulatory system” and called for the reversal of a weakened surveillance system.
She also called for the CEO to be held accountable and forfeit bonuses and large salaries seen after passage of the bill, adding that criminal charges stemming from the Justice Department investigation are possible. rice field.
“Overall, I have to say that we cannot continue to repeat this approach of deregulating banks rather than intervening when big banks get into trouble,” Warren said.
She also called for failed CEOs like SBV’s Greg Becker to be “banned from banking forever.”
Some say Warren’s request amounts to a bailout, as the Federal Deposit Insurance Corporation said it would step in to insure deposits lost in the implosion.
The FDIC generally only guarantees deposits up to $250,000.
SBV was the largest lender to fail since the 2008 financial crisis, and its historic failure was second only to Washington Mutual that year.