Sen. Elizabeth Warren (D-Mass.) asked Federal Reserve Chairman Jerome Powell to recuse himself from the agency’s internal investigation into his role in the collapse of a Silicon Valley bank, a day after Democrats slammed the Trump-era regulator for the recession. Rollback attributed.
Powell’s “actions directly contributed to these bank failures,” Warren Tweeted Tuesday, saying that “Powell should recuse himself from this internal review.”
The Federal Reserve said Monday that Michael Barr, vice chairman for supervision, would begin an internal review of its oversight of the Silicon Valley bank following the bank’s failure last week.
On Monday, Warren, along with a coalition of Democrats including President Joe Biden, criticized a Trump-era regulatory rollback that exempted SVBs and other small and medium-sized banks with less than $250 billion in assets from conducting regular stress tests .
Warren also placed the blame for regulation on the Federal Reserve and said in a new York Times op-ed The agency allowed SVB and other financial institutions to “load at risk”.
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The Fed's review will be released publicly on May 1.
Federal Reserve regulators "need to have humility, and do a careful and thorough review of how we supervised and regulated this firm and what we should learn from this experience," Barr said.
The Silicon Valley bank collapsed last week—marking the biggest bank failure since 2008—with the decline in its focus on the struggling technology startup industry and rising interest rates eroding the value of SVB's investments, including billions were mortgage-backed securities. New York-based Signature Bank, a major lender to the ailing cryptocurrency industry, closed on Sunday after shares plunged nearly 25% on Friday and customers swiftly withdrew their deposits. The Federal Deposit Insurance Corporation has taken over the assets of both banks and has promised all depositors that they will have access to their money by Monday.
Prior to the collapse of SVB and Signature, Powell told Congress last week that the Fed would intensify its already aggressive campaign to raise interest rates to reduce inflation. In the wake of the bank crisis, some economists predicted the Fed would pause its hike in interest rates, which hit a 16-year high in October. Lawmakers on both sides of the aisle, including Biden and Senate Banking Committee member Bill Hagerty (R-Tenn.), have also called for an investigation into the San Francisco Fed's oversight of the SVB. The bank's CEO, Greg Baker, served as a director at the San Francisco Fed office until Friday and was part of the nine-member board since 2019.
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Credit: www.forbes.com /