SVB collapse: Sherrod Brown presses federal government to strengthen banking regulations
Cami Mondeaux
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Sen. Sherrod Brown (D-OH) is urging the federal government to investigate the collapse of Silicon Valley Bank and strengthen banking guardrails to prevent future incidents.
The Ohio senator sent a letter to the Treasury Department, Federal Reserve, and the Federal Deposit Insurance Corporation on Thursday, urging the government agencies to conduct a comprehensive review of the bank’s collapse that led to a strain on the nation’s financial system. The request builds on routine efforts already underway by the Fed and FDIC to investigate the failures, calling on the departments to “identify any broader vulnerabilities in the banking system.”
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“While we are still understanding the full scope of these failures, several factors contributing to their demise have come to light,” the senator wrote. “These banks were over-concentrated and over-reliant on particular industries and operated with an exorbitantly high percentage of uninsured deposits. Furthermore, the banks also lacked adequate risk management.”
Brown urged government leaders to investigate a number of problems that may have caused the bank collapse, including any role social media played in “accelerating the failures.” The Ohio Democrat also pushed for a review of any shortfalls from state or federal regulators that may have contributed to the crisis.
“I urge you to … hold those responsible for these bank failures accountable for their actions, including by clawing back executive bonuses and compensation and taking other appropriate regulatory actions to hold these banks’ executives accountable,” he wrote.
Brown also pressed the agencies to implement stronger regulations on the banking system.
“You must strengthen the guardrails for banks to prevent failures and mitigate contagion and panic risks to protect consumers and small businesses and to preserve small banks and credit unions on Main Street,” he added.
The letter comes as lawmakers on both sides of the aisle seek to address the collapse of SVB and Signature Bank, which prompted a frenzy and strain on the national stock market.
Sen. Elizabeth Warren (D-MA) introduced legislation on Tuesday that would abolish Title IV of the Economic Growth, Regulatory Relief, and Consumer Protection Act and restore certain provisions used to overhaul the U.S. financial system in the aftermath of the 2008 recession.
Warren’s legislation specifically targets a Title IV provision that raised the asset threshold to $250 billion for banks to be regulated as “systemically important.” That rollback, Warren argued, led to the deregulation and subsequent collapse of SVB and Signature Bank, prompting the frenzy and strain on the stock market.
The bill has ignited some disagreement among Senate Democrats as the party members can’t agree on whether they want to repeal the 2018 legislation altogether or pass stronger regulations. Republicans, on the other hand, have rejected the idea.
Senate Minority Whip John Thune (R-SD) dismissed any talks of legislation as being “premature,” especially before lawmakers understand the causes behind the collapse.
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Both SVB and Signature Bank collapsed late last week, prompting major federal intervention to backstop uninsured deposits in a bid to halt panic.
The collapse came after SVB announced on Wednesday that it had sold $21 billion in bonds, cementing $1.8 billion in previously unrealized losses. That announcement sparked a frenzy among venture capital firms, which reportedly began advising clients to pull their money from Silicon Valley Bank — causing its stock to be thrust into a free fall.