Current:Home > InvestThe Fed admits some of the blame for Silicon Valley Bank's failure in scathing report -Streamline Finance
The Fed admits some of the blame for Silicon Valley Bank's failure in scathing report
View
Date:2025-04-18 04:32:15
The Federal Reserve says its own light-touch approach to bank regulation is partly to blame for the collapse of Silicon Valley Bank last month, and it promised more vigorous oversight in the future.
In a scathing 114-page report, the Fed says its own supervisors were slow to grasp the extent of the problems at Silicon Valley Bank, and when problems were identified, supervisors failed to move aggressively enough to ensure those problems were fixed.
The report says changes adopted in 2019 that exempted all but the biggest banks from strict scrutiny — along with a cultural shift towards less-assertive policing of banks — allowed problems at Silicon Valley Bank to fester until it was too late.
"Following Silicon Valley Bank's failure, we must strengthen the Federal Reserve's supervision and regulation, based on what we have learned," said Michael Barr, the Fed's vice chair for supervision, who led the review.
Barr took over as the Fed's top bank regulator last July, replacing Randal Quarles, who oversaw the changes made in 2019. Barr's more aggressive approach to bank regulation has drawn criticism from Senate Republicans.
"We should not be punishing the many well-run financial institutions and the American public for these unique bank and supervisory failures," said Sen. Tim Scott, R-S.C., the ranking Republican on the Senate Banking Committee.
But Fed chairman Jerome Powell agreed with Barr that a course correction is necessary.
"I welcome this thorough and self-critical report on Federal Reserve supervision from Vice Chair Barr," Powell said in a statement. "I agree with and support his recommendations to address our rules and supervisory practices, and I am confident they will lead to a stronger and more resilient banking system."
Sen. Elizabeth Warren, D-Mass., a frequent critic of the Fed chairman, said Powell and others must be held accountable for the meltdown at Silicon Valley Bank.
"This report is an unflinching assessment of SVB's implosion, demanding the Fed immediately adopt stricter bank oversight and Congress swiftly strengthen bank regulations to prevent another crisis," Warren said in a statement.
Barr found that some of the problems at Silicon Valley Bank were unique, based on its heavy concentration in the tech industry, its shoddy risk-management practices, and its large share of uninsured deposits — which customers raced to withdraw when problems surfaced.
But the failure holds lessons for the broader financial system and the way it's regulated.
The speed of the bank run at Silicon Valley — where customers tried to withdraw an unprecedented $140 billion over the course of two days — will force the Fed to rethink its approach, in an age where rumors can spread rapidly on social media and money can be moved instantly with a tap on a smart phone.
The experience also shows that any bank failure can have widespread ripple effects, even if the bank is not extremely large or well-connected. The collapse of Silicon Valley Bank and Signature Bank in New York two days later rattled confidence in the nation's overall banking system and required the federal government to take emergency steps to prevent a wider bank run.
"It is no mystery how to address these failures," said Dennis Kelleher, president of the watchdog group Better Markets. "Put the regulatory cops back on the finance beat and make sure they have the tools, powers, and authorities necessary to rein in inappropriate risk taking and recklessness."
veryGood! (6)
Related
- California DMV apologizes for license plate that some say mocks Oct. 7 attack on Israel
- Wisconsin Supreme Court considers expanding use of absentee ballot drop boxes
- Swiss singer Nemo wins controversy-plagued Eurovision Song Contest
- Backcountry skier killed after buried by avalanche in Idaho, officials say
- Whoopi Goldberg is delightfully vile as Miss Hannigan in ‘Annie’ stage return
- Minnesota raises new state flag, replaces old flag with one to 'reflect all Minnesotans'
- Why 12-team College Football Playoff is blessing, curse for Tennessee, Florida, LSU
- A Turning Point in Financial Innovation: The Ascent of WT Finance Institute
- Travis Hunter, the 2
- North Korean leader Kim supervises latest test of new multiple rocket launcher
Ranking
- Woman dies after Singapore family of 3 gets into accident in Taiwan
- Indiana Pacers blow out New York Knicks in Game 4 to even NBA playoff series
- Pregnant Lea Michele Reveals Sex of Baby No. 2
- Mary Lou Retton Is Going to Be a Grandma, Daughter Skyla Expecting First Baby
- Nearly 400 USAID contract employees laid off in wake of Trump's 'stop work' order
- Forgotten Keepers of the Rio Grande Delta: a Native Elder Fights Fossil Fuel Companies in Texas
- Winners and losers of NBA draft lottery: What Hawks' win means for top picks, NBA
- LENCOIN Trading Center: Turning Crisis into Opportunity, Bull Market Rising
Recommendation
Could Bill Belichick, Robert Kraft reunite? Maybe in Pro Football Hall of Fame's 2026 class
LENCOIN Trading Center: Leading the Future Direction of the Cryptocurrency Market
Stock market today: Asian stocks drift after Wall Street closes another winning week
Get 50% Off Urban Outfitters, 70% Off Coach, 70% Off Kate Spade, 20% Off Oribe, 80% Off Rugs & More
Costco membership growth 'robust,' even amid fee increase: What to know about earnings release
Duke students walk out to protest Jerry Seinfeld's commencement speech in latest grad disruption
Backcountry skier killed after buried by avalanche in Idaho, officials say
Wildfire in Canada’s British Columbia forces thousands to evacuate. Winds push smoke into Alberta