Six key players to watch in the banking crisis

The collapse of the Silicon Valley Bank has drawn renewed attention to the fragility of the US financial system and the government’s role in overseeing it.

This week, Democrats debated approaches to dealing with the crisis, with progressives calling for tougher regulation and moderates resisting it at first.

up to date: Here’s why the ‘too big to fail’ bank bailed out the First Republic

While the Biden administration has dismissed the idea of ​​a 2008-style bailout, Democrats are skeptical about what the future trajectory will look like as tech industry experts, lawmakers and activists confront different sides of the issue. I am questioning.

“Who’s standing up so boldly and boldly saying, you were wrong folks. This is the reality,” said Tim McCarthy, former president of Charles Schwab and now co-CEO of marketGOATS. increase. “This is the true story.”

Below are six key players to watch in the banking crisis.

Michael Burr, Vice Chairman of the Federal Reserve Board

Federal Reserve Board nominee Michael S. Barr was sworn in at a nominating hearing for the Senate Banking, Housing and Urban Affairs Committee on Thursday, May 19, 2022.

Mr. Barr often does not have a positive career for many Americans and works for an institution that is considered rather obscure and complex by many outside the financial industry.

But as the development of Silicon Valley banks continues to inform new policies and political considerations in Washington and the West Coast, the Fed’s top regulators are expected to play a pivotal role.

In the coming weeks, Barr is tasked with thoroughly assessing how the Federal Reserve has overseen the SVB. He also looks at the regulations and plans to present a memo later in the spring.

“This is going to be very serious,” McCarthy said, indicating it’s likely to have ramifications beyond just discussions among lawmakers in Washington, D.C.

But Burr is under his own pressure.

The Fed has faced heavy criticism from both parties over whether the Fed and other state regulators missed a sign of the SVB’s dire financial woes. Barr, who is responsible for regulation and oversight of the Federal Reserve, is likely to answer questions from lawmakers about his role.

Senator Sherrod Brown (D-Ohio) Chairman of the Senate Banking Committee

Senator Sherrod Brown (Democrat, Ohio)
Senator Sherrod Brown (D-Ohio) addresses reporters before the weekly Senate Democratic Policy Luncheon on Wednesday, March 15, 2023.

At first, the populist senator from the Rust Belt may seem a far cry from Northern California’s tech-centric, venture-capital-flowing bubble.

But Brown’s role as chairman of the Senate Banking Committee makes him a key figure in regulatory debates in and out of Congress, especially as the SVB collapse continues to disrupt various sectors.

In his capacity as chairman of the committee, Brown called on officials to launch a full-scale investigation into a major financial failure and sent a memo outlining areas vulnerable to a collapse of such magnitude.

In a letter to the Treasury Department and the Federal Reserve, Brown said, “These banks are overly concentrated, overly dependent on specific industries, and operate with exorbitantly high percentages of uninsured deposits. It was done,” he pointed out. “Furthermore, the bank also lacked proper risk management.”

Brown stands in line with fellow progressives like Senator Bernie Sanders (I-Vt.) and Elizabeth Warren (D-mass, on financial regulation), but also moderates colleagues and Biden. Well recognized.

His location in Ohio — a deficit-prone state that Democrats haven’t quite given up on yet — can translate how the complexities of the SVB crisis affect people at home.

Brown believes tighter regulation is a good first step.

“Bank guardrails must be strengthened to prevent bankruptcies, reduce the risk of contagion and panic, protect consumers and small businesses, and keep Main Street small banks and credit unions alive,” he said. Elsewhere in the letter, Mr. Brown points out that his middle- and low-income preferences.

Senator Elizabeth Warren (Democratic Massachusetts)

Senator Elizabeth Warren (Democratic Massachusetts)
Senator Elizabeth Warren (D-Massachusetts) addresses reporters as she arrives on the Senate floor for a vote on the nomination Wednesday, March 15, 2023.

Warren, a liberal senator from Massachusetts, insists on strict financial regulation and consumer protection. She is also arguably the banking sector’s biggest agitator. For progressives critical of the financial industry, she’s the highest capitol her hill her champion.

The Senator’s position between the left-wing Democrats who love her and the big banks who don’t feel too warm is in the limelight of collapse.

Counterattack: Warren and Porter unveil bill to undo Trump-era Dodd Frank rollback

To her allies’ delight, she has lashed out at executives and lobbyists who have taken the lead in pushing for deregulation and laying out blueprints for future policies since the issue was first exposed.

“Elizabeth Warren was right all along about reforming the financial sector. After the Great Recession, she predicted that she would be back here without meaningful accountability.

“At what point will her colleagues follow her lead and ensure that the most irresponsible actors in banking and finance are not allowed to continue to jeopardize our nation through consequences and lack of precaution? ?”

Her critics, however, see her influence as more troubling.

“If you are a budget balancer, or at least a financially responsible politician on the Democratic side, the problem you have is to use it as an opportunity to express your own electoral desires to your left. I mean, there are people pushing on, McCarthy.

“They are afraid to speak out because they feel that the more left wing of the party will criticize them for trying to make the program sustainable.

Rael Brainerd, Director of the National Economic Council

Federal Reserve Vice Chairman Lael Brainard pictured in Washington on Sept. 23, 2022. Brainard was named President Biden’s chief economic adviser on Tuesday. (AP Photo/Manuel Barce Seneta)

Brainerd, an economist and former Federal Reserve Board official, didn’t get a chance to try out her new role leading the National Economic Council before the massive financial disaster struck.

Brainerd, in his previous role on the Federal Reserve Board, most recently as vice chairman, has strongly cautioned against deregulation in an industry that previously wreaked havoc on the U.S. economy.

How she got here: Biden names Fed’s Lael Brainard as next economic adviser

By elevating Brainard to leader of the NEC (one of the most influential appointed positions in government), Biden entrusts her as an ambassador between the White House and key institutions, members of the Capitol. rice field. The proposed legislation could face hurdles given the Republican-dominated nature of the House and the narrow Democratic majority in the Senate.

Business magazine Barron’s this week Are listed Brainerd was named one of the “100 Most Powerful Women in American Finance”.

Rep. Law Khanna (D-California)

Rep. Law Khanna (D-California)
Rep. Lokanna (D-California) calls on President Biden to declare a climate emergency during a press conference with climate activists on Wednesday, July 27, 2022.

Khanna is uniquely positioned to articulate his assessment of dealing with bank failures and how regulators were able to avoid such a dramatic collapse.

California legislators often stand at the crossroads of two competing forces. He’s the leader of a progressive movement for policy influence on the Capitol, but he’s also a representative of Silicon Valley and has to navigate all the different technological interests.

As a progressive, he has criticized the reluctance of more moderate Democrats to impose tighter regulation on banks. He denounced his SVB’s previous work in a recent cable news segment calling on the government to reduce restrictions, clashing with some centrists in his party.

Read more: Silicon Valley, undersigned banks lobbied to loosen banking rules

“They worked to loosen the restrictions of the Dodd-Frank Act,” Khanna said. “Morning Joe” on MSNBC He noted that he voted against a 2018 bill that relaxes banking laws.

“They lobbied me and others to undermine them in order to exempt them from regulations that could have prevented this crisis,” he said.

Jeff Zientz White House Chief of Staff

Incoming White House Chief of Staff Jeff Zientz attends an event with President Joe Biden in the East Room of the White House, Washington, Feb. 1, 2023, to outgoing White House Chief of Staff Ron Klein. expresses gratitude. (AP Photo/Susan Walsh, File)

Mr. Biden’s new chief of staff came at a crucial time. Biden and his administration officials have just said goodbye to the president’s beloved longtime aide, Ron Klein. Many Democrats hoped Zientz would regain his positive momentum.

Some former bank executives have criticized Democrats for not effectively managing the party’s competing divisions. On the one hand, progressives want to be tougher on banks in favor of a fairer system for the majority of Americans. Moderates want a more balanced approach in communicating what the party should really do, especially as opposed to Republicans.

‘Congress must act:’ Biden urges Congress to crack down on failed banking executives

As chief of staff, Zientz will likely have to juggle these differences of opinion while helping Biden keep the message across. outlet report He and Brainard immediately gave Biden an update on the developments around the SVB last Friday and continued to brief him late into the weekend.

Zients’ resume shows relevant experience, navigating both Wall Street and Silicon Valley on Facebook’s board of directors, and as Director of NEC under former President Obama, helping to unravel the banking crisis. .

He recently began publicizing the government’s response.

“The Biden-Harris administration has acted quickly to stabilize the banking system without putting taxpayer funds at risk, which is a priority for us.” We are moving forward with concrete proposals that Congress can pass now to hold senior executives accountable.

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