WASHINGTON — House Financial Services Committee Chair Patrick McHenry, R-N.C., and Senate Banking Committee ranking member Tim Scott, R-S.C., penned joint letters Monday seeking accountability from the Federal Deposit Insurance Corp. and Federal Reserve regarding the failure of Silicon Valley Bank and Signature Bank earlier this month.
The Carolina Republicans suggested that along with other root causes, recent notable bank failures were the result of regulatory incompetence and say they have a responsibility to conduct a full autopsy as to both the root causes of the failures and why the regulators did not prevent the collapses.
“These responsibilities include obtaining full information about what appears to be glaring bank mismanagement, fundamental lack of prudence in bank risk and balance sheet management, and regulators’ lack of basic supervision and enforcement of safety and soundness rules, regulations, and principles,” McHenry and Scott wrote in the letter to the FDIC.
They asked both agencies for complete timelines chronicling their supervisory or resolution-related activity toward SVB and Signature, including the identities of all agency employees involved in such activity.
In their joint letter to the Federal Reserve, Scott and McHenry additionally requested a timeline and names of employees involved in the Fed’s recommendation to invoke the Systemic Risk Exception for the two banks.
The lawmakers also signaled more serious congressional inquiries could be invoked to probe the bank failures in the future — even implying legal culpability — and said regulators should preserve their records for congressional inquiry.
“This letter serves as a formal request to preserve all existing and future records and materials in your possession relating to the topics addressed in this letter,” the lawmakers wrote.
The lawmakers’ letters underscored lawmakers’ differing responses to the bank failures, while also representing one of the GOP’s first substantive post-failure attack strategies. While Democrats have already begun blaming banks for excessive risk-taking, many Republicans initially claimed “woke” policies contributed to the institutions‘ downfall.
President Biden has pointed the finger at banks’ poor management and recently asked Congress to strengthen regulators’ ability to claw back compensation like stock sales from failed bank executives of SVB and Signature-sized firms, something only currently applicable to the largest banks.
The lawmakers asked the FDIC and Fed to provide the requested information no later than March 31, 2023.