- The NYT reported that Fed Chair Powell blocked a mention of regulatory failings in a report on SVB.
- The final joint statement on SVB’s fall speaks mostly of regulators’ work since the 2008 crisis.
- Some have blamed the fall of SVB on a lack of oversight stemming from policy rollbacks by the Trump Administration.
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Federal Reserve Chair Jerome Powell blocked a statement on regulatory failings that led to the collapse of Silicon Valley Bank, according to a report from the New York Times.
Government officials had intended to include a statement on the flaws in banking regulation that led to the implosion of Silicon Valley Bank, but Powell struck them from the official joint statement delivered by the Fed, Treasury Department, and Federal Deposit Insurance Corporation, the NYT reported Thursday.
Instead, the final statement only spoke positively of financial regulation, praising the reforms put in place after the 2008 Financial Crisis.
“The US banking system remains resilient and on solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry,” the statement said.
A person familiar told the NYT that Powell decided to take out the line mentioning lax regulation in order to direct attention towards the efforts being taken to strengthen the financial system.
Regulators have vowed to fully back SVB’s depositors, including those over $250,000. The Fed has also loaned $165 billion to US banks over the past week to build up liquidity in the system, and said it would investigate its own oversight of SVB.
Silicon Valley Bank was taken over by the FDIC last Friday, sparking an intense sell-off in bank stocks and wavering confidence in the US banking system. Critics say the bank’s demise was partly spurred by the Fed’s aggressive monetary policy as well as lax oversight of banks in recent years, thanks to policy rollbacks during the Trump administration.
Silicon Valley Bank’s CEO Greg Becker also lobbied Congress to ease regulation of the bank as well as other mid-sized lenders, The Lever reported, citing a 2015 letter Becker wrote to the Senate in which he claimed SVB “does not present systemic risks.”
President Biden has promised to tighten regulation in the wake of SVB’s failure, assuring Americans that the US banking system is safe. Still, markets are in a state of chaos over the SVB’s failure, with 11 banks pouring $30 billion into First Republic Bank on Thursday to prevent another potential collapse.