Senator Elizabeth Warren blasted Federal Reserve Chair Jerome Powell for “an astonishing list of failures” that contributed to the collapse of Silicon Valley Bank and Signature Bank in a letter to the Fed chief Wednesday.
“SVB and Signature accumulated risk and made dangerous decisions about how to manage that risk,” Warren said. “They did so in part because of greed and incompetence – but were allowed to do so under faulty supervision and in a weakened regulatory environment that you helped to create.”
“You owe the public an explanation,” she added.
The letter, which detailed several efforts to weaken regulations put in place following the financial crisis and lax supervision by the Fed, asked Powell to respond to 11 questions related to the central bank’s oversight by March 29.
Warren, a Massachusetts Democrat, also asked Powell to recuse himself from an internal investigation the Fed is conducting into its regulation and supervision of SVB. The results of the review, which is being led by Vice Chair Michael Barr, will be made public by May 1, the Fed said Monday. A bipartisan group of lawmakers are instead calling for an independent investigation of what went wrong.
SVB’s failure on Friday, followed by Signature Bank’s shuttering over the weekend, set off a global market rout amid fears of broader financial-market contagion.
‘Aided and abetted’
The Fed and other regulators announced emergency measures to help contain the budding crisis, including a new loan program from the central bank that will make is easier for banks to borrow to meet deposit withdrawal demand.
In her letter, Warren also said Powell supported a 2018 law that exempted mid-sized banks like SVB from the same stringent oversight requirements faced by the biggest banks, a change that she and some other progressives have said contributed to SVB’s demise. Testifying about the bill at the time, Powell said the Fed would still have the ability to regulate mid-size banks if warranted, and that gave them “the tools that we need.”
Warren, who opposed Powell’s renomination in 2022 over his regulatory views, also criticized him for leading efforts to weaken or eliminate guardrails that would have applied to SVB, including stronger liquidity requirements. And she said Powell was also to blame for supervisory failures by the San Francisco Fed, which regulated SVB along with state regulators.
“Make no mistake: your decisions aided and abetted this bank failure, and you bear your share of responsibility for it,” she wrote.
SVB Chief Executive Officer Greg Becker held a spot on the San Francisco Fed’s board as a Class A director, a tier made up of representatives from district banks.
Warren called this an “egregious conflict of interest” and asked Powell whether it had any impact on the regional bank’s oversight of SVB.
