Before Collapse of Silicon Valley Bank, the Fed Spotted Big Problems

Other worries center on whether Jerome H. Powell, the Fed chair, allowed too much deregulation during the Trump administration. Randal K. Quarles, who was the Fed’s vice chair for supervision from 2017 to 2021, carried out a 2018 regulatory rollback law in an expansive way that some onlookers at the time warned would weaken the banking system.

Mr. Powell typically defers to the Fed’s supervisory vice chair on regulatory matters, and he did not vote against those changes. Lael Brainard, then a Fed governor and now a top White House economic adviser, did vote against some of the tweaks — and flagged them as potentially dangerous in dissenting statements.

“The crisis demonstrated clearly that the distress of even noncomplex large banking organizations generally manifests first in liquidity stress and quickly transmits contagion through the financial system,” she warned.

Senator Elizabeth Warren, Democrat of Massachusetts, has asked for an independent review of what happened at Silicon Valley Bank and has urged that Mr. Powell not be involved in that effort.  He “bears direct responsibility for — and has a long record of failure involving” bank regulation, she wrote in a letter on Sunday.

Maureen Farrell contributed reporting.

Article source: https://www.nytimes.com/2023/03/19/business/economy/fed-silicon-valley-bank.html