A Senate panel grilled federal regulators on Tuesday about whether they should have done more to prevent Silicon Valley Bank from collapsing.
Sen. Katie Britt, the freshman from Alabama, took part in the Senate Committee on Banking, Housing, and Urban Development hearing, pressing that regulators knew what was going on and should have acted.
“Six months prior (to the bank failure), JP Morgan noticed that there was a problem,” Britt told Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation. “Their equity research team, and then Moody’s obviously met with SVB prior to saying that they were going to downgrade. So I’ve heard y’all say this was a rushed process. If the outside sector knew this was happening, you and the Fed and the 4,000 examiners should have known that this was coming as well.”
Britt also criticized the Federal Reserve for asking for more powers, despite the uncertainty that it fully utilized the powers it is already provided.
“I find it concerning, though, when you all were asked, each one of you was asked, ‘would you like to see more powers, more (regulatory) strength in this?’ Every single one of you said ‘yes’ when you don’t actually know if you utilized the tools in your toolbox correctly, or if the people that were under your supervision were supervising appropriately,” Britt said. “I think that’s what people hate about Washington. We have a crisis, and you come in here without knowing whether or not you did your job. You say you want more. That’s not the way this works. You need to be held accountable, each and every one of you.”
The failure of SVB and Signature Bank days later brought a financial crisis as confidence in the bank system plummeted.
Michael Barr, the Fed’s vice chairman for supervision, said SVB executives are to blame for improper risk management, and the Senate panel agreed that bank executives need to be held accountable, but still questioned how regulators missed the problem.