July 27, 2023
After admitting they failed in their oversight of the now defunct Silicon Valley Bank, which cost taxpayers and banking customers $22 billion to stabilize before its sale, federal regulators today announced a plan to pass the buck and shift the burden of stabilizing our banking industry to the larger institutions that played no role in SVB’s collapse or the current tenuous situation with hundreds of smaller banks.
Said CASE chairman Gerard Scimeca, “The Federal Reserve and FDIC found a carpet big enough under which to sweep their culpability for SVB’s crash and causing a the current tenuous situation with regional banks, a failure that has weakened our banking system and could potentially lead to another banking crisis. Of course, the larger institutions they now seek to burden are showing no signs of instability, but none of that matters when your goal is to prioritize window dressing in an attempt to ease public concerns instead of fixing the mistakes that lead to regulators ignoring their primary responsibility of industry-wide oversight.”
SVB fell insolvent when the bonds they held lost value due to over a dozen interest rate hikes by the Federal Reserve over the past two years, giving the independent agency a direct hand in creating the conditions for its collapse. In a report they released in April the FED further admitted its lax oversight and noted its failure to act on numerous warning signs prior to SVB’s demise. This failure has further played a substantial role in undermining the financial position of hundreds of other smaller and regional U.S. banks. Scimeca claimed that forcing larger institutions with at least $100 billion in assets to increase their capital holdings by up to 19 percent is the wrong answer and will only further hamstring consumers and our economy.
“This is like responding to the roof caving in with more strict rules on foundations,” Scimeca noted. “Handcuffing America’s largest institutions with higher capital requirements will increase interest rates on commercial borrowers in the midst of a major credit crunch that is causing our economy to tread water at best. It is absolutely the wrong response. Instead of pursuing a politicized agenda and following the lead of unaccountable international bodies like the Basel Committee, the Fed should do what’s best for American consumers and our economy.”
