House lawmakers tore into top U.S. bank regulators Wednesday at a second day of congressional hearings this week about how Silicon Valley Bank and Signature Bank collapsed practically overnight on March 10 and March 12.
“We need competent financial supervisors. But Congress can’t legislate competence,” House Financial Services chairman Rep. Patrick McHenry, R-N.C., told top officials at the Federal Reserve, Treasury and FDIC at the beginning the hearing.
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The committee’s ranking member, Rep. Maxine Waters, D-Calif., questioned whether the repeated warnings regulators delivered to SVB about its balance sheet and long-term interest risks were sufficient.
“The light touch cautions from the Fed to SVB management are clearly not what Congress intended for bank supervision,” said Waters.
McHenry slammed the panel for a lack of transparency over that fateful weekend when the three regulators hastily arranged backup financing to ensure depositors at the two banks wouldn’t lose any money in their collapse.
There are no notes publicly available from regulators’ emergency meetings the weekend the banks collapsed, McHenry said. “That lack of transparency has a negative effect on the public view of the safety of the financial arena,” he added.
Members of the Republican majority House have already indicated they will challenge many of the decisions made by regulators in the hours and days after SVB collapsed and Signature Bank followed 48 hours later. Chief among these is why regulators determined so quickly that the bank failures constituted a systemic risk to the financial system, they’ve said.
On Tuesday, bank stocks turned negative following a similar hearing before the Senate Banking Committee. Investors may have been spooked by the three top regulators each saying they favored more stringent rules for banks with more than $100 billion in assets.
Michael Barr, vice chair for supervision at the Federal Reserve, Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation and Nellie Liang, undersecretary for domestic finance at the Treasury Department, are testifying before the House committee after appearing Tuesday before the Senate Banking Committee.
This is a developing news story, and will be updated throughout the hearing.
