US Senator Warren criticizes Fed, calls for probe into SVB failure

[March 20, 2023]  By Kanishka Singh and Rishabh Jaiswal
 
WASHINGTON (Reuters) -U.S. Senator Elizabeth Warren on Sunday called for an independent probe into the recent failures of Silicon Valley Bank and Signature Bank and took specific aim at the head of the Federal Reserve Bank of San Francisco responsible for oversight of SVB.   

U.S. Senator Elizabeth Warren (D-MA) gestures as Federal Reserve Chair Jerome Powell testifies before a Senate Banking, Housing, and Urban Affairs Committee hearing on the "Semiannual Monetary Policy Report to the Congress", on Capitol Hill in Washington, D.C., U.S., June 22, 2022. REUTERS/Elizabeth Frantz/File Photo/File Photo

Democrat Warren, who is pushing for tighter banking regulations, sent a letter to the inspectors general of the U.S. Treasury Department, the Federal Deposit Insurance Corp (FDIC) and the Federal Reserve on Sunday, urging regulators to examine the recent management and oversight of the banks which collapsed earlier this month.

California regulators shuttered Silicon Valley Bank on March 10 and appointed FDIC as receiver. It was the largest U.S. bank collapse since Washington Mutual went bust during the financial crisis of 2008. On Friday, the bank's parent, SVB Financial Group, said it filed for Chapter 11 bankruptcy protection.

U.S. prosecutors are investigating the SVB collapse, a source familiar with the matter told Reuters last week.

Warren also said on Sunday she does not have faith in San Francisco Federal Reserve President Mary Daly in the wake of SVB's collapse.

"No, I do not," Warren said on CBS's "Face the Nation" when asked if she has faith in Daly.

Financial stocks lost billions of dollars in value since Silicon Valley Bank and Signature Bank collapsed this month. President Joe Biden said on Friday the banking crisis has calmed down. He also promised Americans that their deposits are safe.

The inspectors general for the Treasury, Fed, and FDIC should deliver a preliminary report to Congress in 30 days, Warren said in her letter.

"The bank's executives, who took unnecessary risks or failed to hedge against entirely foreseeable threats, must be held accountable for these failures. But this mismanagement was allowed to occur because of a series of failures by lawmakers and regulators," she wrote in the letter.

She also criticized Federal Reserve Chair Jerome Powell in her CBS interview.

"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 said.

(Reporting by Kanishka Singh in Washington and Rishabh Jaiswal in BengaluruEditing by Frances Kerry and Matthew Lewis)

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