WASHINGTON — A bipartisan group of lawmakers overseeing the recent turmoil in the banking sector said Wednesday they aim to boost Americans’ confidence in the banking industry after the fact Silicon Valley Bank And signature bank collapsed in the last two weeks.
The two House and Senate committees that oversee banking have announced back-to-back hearings next week to examine regulatory failures that have missed signs the banks are in trouble. Federal Deposit Insurance Corp. Chairman Martin Gruenberg, Federal Reserve Vice Chairman for Oversight Michael Barr and US Treasury Secretary Nellie Liang are scheduled to testify at both hearings.
The high-profile hearings come as lawmakers try to understand what led to the collapse of the two institutions, and many Democrats introduce legislation to strengthen safeguards for the financial system. Regulators and legislators are also trying to contain further damage to the economy and to strengthen confidence in the banking system.
“I hope that we can actually glean and establish a lot of information from this first hearing [the facts]said Rep. Patrick McHenry, a Republican from North Carolina and chairman of the House Financial Services Committee, during an American Bankers Association summit. “I think this will bring a lot of security and confidence to the market.”
Last week, the Fed appointed Barr to lead a review of the SVB’s failure. McHenry said he welcomed the investigation and “also the other views from financial regulators.”
The Republican said Congress has a “very important role” in reviewing how the banks have failed. But he stopped demanding legislation to prevent future collapses.
McHenry said he wants to make sure the bill reflects “the realities of the situation.”
Sen. Tim Scott, a Republican from South Carolina and a senior member of the Senate Banking Committee, also said writing new legislation should take a back seat at hearings to examine what happened.
“Unfortunately, it’s a common occurrence in Washington that leftists in committee talk about Dodd-Frank and the 2018 reforms,” he told the Bankers Group. He was referring to calls in Congress to repeal some of the provisions of the 2018 law that weakened the regulatory powers of the landmark 2010 Dodd-Frank Act.
“Nothing could be a clearer red herring than that,” he added.
Former SVB CEO Greg Becker lobbied lawmakers for certain exclusions of Dodd-Frank. But Scott said regulators already had the authority they needed to protect the banking system and had failed to do so.
He also said bank executives have a responsibility to adjust their strategies as the Fed embarks on an aggressive cycle of rate hikes to curb inflation.
McHenry also questioned the value of adding new regulators or laws to regulate the financial sector.
“It’s important to note that we cannot regulate jurisdiction,” McHenry said. “The management of institutes must be competent, board members must be competent. We cannot enforce this either in the financial sector, in the management of financial institutions, or with the supervisory authorities.”
Senator Sherrod Brown, an Ohio Democrat and chairman of the Senate Banking Committee, compared the collapse of the SVB to the devastating train wreck in East Palestine, Ohio. He said his state’s disaster and bank failures were partly due to companies pushing for less regulation and putting less effort into their own safeguards.
“They have one thing in common: corporate lobbyists have been pushing for weaker rules and less oversight,” he told the ABA in his opening statement. “Companies have cut costs, not invested in security – or in the case of SVB, perhaps too incompetent to realize that they too should care about security.”
Brown, who said congressional hearings could remain “for the most part” bipartisan, warned banking lobbyists against using the crisis as an opportunity to lobby Congress for weaker oversight. He said “we will continue to pay the price” if policymakers allow weaker regulations.
Rep. Maxine Waters, senior member of the House Financial Services Committee, told the ABA that Congress needed to “dig deep into what’s going on at the Silicon Valley bank.” The California Democrat, who has called for legislation to increase congressional authority over recoveries for bank directors, said she is taking a close look at the high rate of uninsured deposits at the SVB.
At the time of the failure, 94% of the bank’s deposits were above the FDIC’s $250,000 insurance limit.
“And of course I want to see if all the regulators … really missed the opportunity to see what’s happening and to know what’s going on with the balance sheet and to be able to put things right before they got to the point of collapse.” ‘ Waters said.
She added that financial regulators’ quick decision to shut down the SVB and safeguard customers’ deposits showed the Biden administration’s competence.
“The way the FDIC, the Treasury Department, the President, the way they’ve handled this should be a message to everyone that your government is at work and can solve problems — serious problems — if.” they work together,” she said.