Silicon Valley Bank’s Risks Went Deep. Congress Wants to Know Why.

As customers and investors began to probe for weak spots in the financial system, other banks found themselves in tumult — including Credit Suisse in Switzerland, which was taken over, and First Republic, which took a capital injection from other banks.

Lawmakers from both parties want answers.

“It is concerning that Federal Reserve staff did not intervene in a timely manner and use the powerful supervisory and enforcement tools available to prevent the firm’s failure and subsequent market uncertainty,” Republicans on the House Financial Services Committee wrote in a letter released Friday.

Senator Rick Scott, Republican of Florida, and Senator Elizabeth Warren, Democrat of Massachusetts, have introduced legislation to require a presidentially appointed and Senate-confirmed inspector general at the Fed and the Consumer Financial Protection Bureau. The Fed already has an internal watchdog, but this one would be appointed by the president.

Recent bank failures “serve as a clear reminder that banks cannot be left to supervise themselves,” Ms. Warren warned. She has also pushed for an inspector general review of what went wrong with Silicon Valley Bank.

Congress wants to know whom to blame.

Much of the focus in recent weeks has been on who at the Fed is to blame. Mr. Barr started in his role midway through 2022, so he has mostly been left out of the finger-pointing.

Article source: https://www.nytimes.com/2023/03/28/business/economy/silicon-valley-bank-congress-hearings.html