Sen. Elizabeth Warren on Sunday called for an investigation into the Federal Reserve system over weak regulatory operations that she said led to the implosion of Silicon Valley Bank and Signature Bank.
The request from the Massachusetts Democrat – who sits on the Senate Banking Committee – came as a new study found that nearly 200 other US banks are at risk of failure if depositors rotate their holdings, because they hold large portions of their assets in financial instruments. Interest rate-sensitive securities such as government bonds and mortgage-backed securities.
SVB, the nation’s 16th-largest bank, and Signature invested deposits in high-yield securities, long-term mortgage-backed securities and low-interest-rate bonds in the pandemic era, only to see the value of assets plummet when the Fed raised rates. earlier this month.
“Let me describe what I see as a problem; starting in 2016 or so, these billion-dollar banks like SBV … came to Washington and kept saying ‘ease the regulations on us. “We’re like very small banks, so they’ve relaxed the regulations,” Warren said on ABC’s “This Week.”
Then Donald Trump ran for president promising that he would ease regulations on these multi-billion dollar banks. Then he was elected president and appointed a lot of regulators who relaxed banking regulations.”
Warren noted that in 2018 Congress approved a dossier Bipartisan regulation declined The banking industry and “what happened is what we should have expected.”
“These banks… loaded with risk, boosted their short-term profits, awarded themselves huge bonuses and big salaries and blew their banks,” said the senator.
Warren called for an independent investigation of the Fed and “the entire regulatory system,” and demanded that the weak system of oversight be reversed.
It also called for CEOs to be held accountable and forfeiture of the large bonuses and salaries seen in the wake of the law’s passage, adding that criminal charges from the Justice Department’s investigation are possible.
“We have to say broadly that we can’t keep repeating this approach of weakening regulations on banks rather than stepping in when the giant banks get in trouble,” Warren said.
It also called for a “failed CEO like SBV’s Greg Baker to be banned from banking forever”.
Warren’s demands came as the Federal Deposit Insurance Corporation said it would step in to ensure deposits are lost in internal collapses, in what some say amounts to a bailout.
The FDIC only guarantees deposits of up to $250,000.
SBV was the biggest bank to fail since the 2008 financial crisis, and its historic collapse was second only to Washington Mutual that year.
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