Warren blasts lax oversight of banks
Calls for series of investigations after collapse of SVB, Signature
The Bay State’s senior senator made the full Sunday talk show rounds this weekend, telling every news station that would listen how fed up she is with the leadership of the nation’s central bank amid the collapse of several financial institutions.
“What happened is exactly what we should have predicted,” U.S. Sen. Elizabeth Warren told CBS’s Margaret Brennan.
“This whole tranche of banks has been under regulated for five years now,” she said.
Warren was speaking about 10 days after it became apparent that California based Silicon Valley Bank would fail amid a modern day, social media driven banking run. A second lender, New York based Signature Bank, would fail days later.
The collapse of both institutions represent, according to Reuters, the second and third largest banking failures in U.S. history, behind only the 2008 folding of Washington Mutual.
Warren, a member of the Senate Banking Committee, is proposing that the Federal Deposit Insurance Corporation’s $250,000 worth of account protections be raised and that someone find out what precisely led to the collapse of SVB and Signature Bank.
“I want to see an independent investigation, the Fed doesn’t just get to investigate itself. I want to see us make a change in the laws, roll back the rollbacks to put tougher regulations in place,” she said on ABC’s “This Week.”
According to Warren, the
Federal Reserve’s chairman is ultimately responsible for making sure that banks are able to protect their customer’s deposits, and changes in the law implemented under former President Donald Trump and championed by the Fed chair have given too many smaller lenders the leeway to go without oversight from regulators.
“Jerome Powell just took a flamethrower to the regulations, weakened them, weakened them, weakened them, weakened dozens of the regulations. And then the CEOs of the banks did exactly what we expected. They loaded up on risk that boosted their short-term profits,” Warren said during an interview on NBC’s “Meet the Press.”
“They gave themselves huge bonuses and big salaries; and they exploded their banks,” she said on ABC.
Even with the changes in banking regulations, the former Harvard Law professor said, the Federal Reserve still has work to do that for the moment remains undone under Powell’s leadership.
“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 told Chuck Todd.
Powell is expected to make an announcement this week regarding the central bank’s key interest rate, which he told the Senate on March 7 would likely be raised in response to better than expected economic news coming out of February.
“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”
Three days after those remarks, the first bank would collapse.