Political fallout in the US from the collapse of Silicon Valley Bank continued on Sunday when leftwing Senator Elizabeth Warren hit the morning talkshows and repeatedly called for an independent investigation into US bank failures and strongly criticised Federal Reserve finance officials.
The progressive Democrat from Massachusetts, who has positioned herself as a consumer protection advocate and trenchant critic of the US banking system, told CBS’s Face the Nation that she did not have faith in the San Francisco Federal Reserve president, Mary Daly, or the Fed chairman, Jerome Powell.
“We need accountability for our regulators who clearly fell down on the job,” Warren said, adding that it “starts with” Powell, who she said “was a dangerous man to have in this position”.
“Remember the Federal Reserve Bank and Jerome Powell are ultimately responsible for the oversight and supervision of these banks. And they have made clear that they think their job is to lighten regulations on these banks. We’ve now seen the consequences,” Warren added.
Asked if she had “faith” in Daly, under whose jurisdiction SVB fell, Warren said flatly: “No, I do not.”
In the wake of the collapse of Silicon Valley and Signature banks, the one-time presidential candidate has in recent days launched a broad offensive on politicians on both the left and the right who supported Trump-era deregulation of smaller US banks.
Warren sent a letter to the inspectors general of the US treasury department, the Federal Deposit Insurance Corp (FDIC) and the Federal Reserve, urging regulators to examine the recent management and oversight of the banks which collapsed earlier this month.
Last week, Warren unveiled legislation that would repeal that law and raise “stress tests” on “too big to fail” banks from $50bn to $250bn. On Sunday, Warren also argued for raising federal guarantees on consumers deposits above the current $250,000.
“Is it $2m? Is it $5m? Is it $10m? Small businesses need to be able to count on getting their money to make payroll, to pay the utility bills,” Warren said. “These are not folks who can investigate the safety and soundness of their individual banks. That’s the job the regulators are supposed to do.”
Warren broadened out her criticism on NBC’s Meet the Press, calling for a stop to interest rates rises when central bankers meet next week and claiming that Powell was pushed by Congress to support deregulation in 2018.
“Look, my views on Jay Powell are well-known at this point. He has had two jobs. One is to deal with monetary policy. One is to deal with regulation. He has failed at both,” she said.
US prosecutors are investigating the SVB collapse, a source familiar with the matter told Reuters last week, after the $212bn bank collapsed when depositors rushed to withdraw their money.
A blame-game erupted, with some arguing that the bank’s apparent lack of adequate risk management, combined with deregulation and a sharp interest rate rises, had created an accident waiting to happen.
US banks have since lost around half a trillion dollars in value. On Friday, President Joe Biden promised that bank customers deposits are safe and the crisis had calmed down.
In Warren’s letter published Sunday, the senator also called for executives of the failed banks to be held to account.
“The bank’s executives, who took unnecessary risks or failed to hedge against entirely foreseeable threats, must be held accountable for these failures,” Warren said. “But this mismanagement was allowed to occur because of a series of failures by lawmakers and regulators.”
