Sens. Thom Tillis (R-N.C.) and Jon Tester (D-Mont.) today prompted President Biden to designate an independent detective to additional probe the current bank failures. “Though the regulatory agencies tasked with overseeing our financial institutions have released a series of internal reports examining causes, failures and corrective measures, we believe an independent examination that covers the full jurisdictional scope of these failures, led by nonpartisan experts, is critically important,” the senators stated in a joint letter.
Tillis and Tester stated that an independent evaluation is essential considered that internal evaluations by federal and state firms concluded that supervisory actions and inactiveness played “a key role” in the failures. “Self-reflection, while appreciated, is insufficient to ensure stressors to our financial system of this magnitude are not repeated,” they stated. “Oversight efforts will benefit from a comprehensive examination spanning both federal and state financial regulators, as well as elsewhere in the federal government where response efforts are taking place.” Their proposition resembles one made by Federal Reserve Governor Michelle Bowman recently, who recommended the Fed have an independent 3rd party carry out an evaluation to supplement its own.
Both senators are members of the Senate Banking Committee, which held a hearing that very same day with state and federal regulators on the failures. At the hearing, Fed Vice Chairman of Supervision Michael Barr stated he anticipated the firm to propose both supervisory and regulative modifications as an outcome of its evaluation of the Silicon Valley Bank’s failure. Tester countered that the evaluation revealed the failure wasn’t an outcome of regulative failure. Rather, the firm stopped working to appropriately customize guideline to match SVB’s threat, as allowed by a 2018 Senate expense, S. 2155, he stated.
“Regulation needs to fit the risk,” Tester stated. “I think when 2155 was put up, it was put up with the idea that if you had a risky portfolio—regardless of size—that the Fed and the other agencies had the ability to tailor whatever threat that those risky business dealings (merited).”
