SVB collapse: House to hold first hearing on SVB as lawmakers remain split on response

TWhile the House is expected to hold its first hearing regarding the collapse Silicon Valley Bank, it will be a significant step in addressing the financial crisis. However, lawmakers remain divided about how to avoid similar situations in the future.

According to lawmakers, a hearing will take place on March 29 by the House Committee on Financial Services to ask federal financial regulators about their response to the recent bank collapse. This hearing will be the first in a series of hearings as lawmakers attempt to find the root cause of the bank failures and to devise preventive measures.

SVB COLLAPSE SHERROD BROWN SHEROD BROWN PRESSES THE FEDERAL GOVERNMENT TO STRENGTHEN BANCKING REGULATIONS

“We are working around the clock to deliver answers to the American people in order to protect depositors, promote the safety and soundness of America’s banks, and strengthen our financial system,” Maxine Waters (D.CA), and Patrick McHenry(R-NC), were the top two legislators on the committee. They wrote a joint statement. “We will conduct this hearing without fear or favor to get the answers the American people deserve.”

Martin Gruenberg (chairman of the board at Federal Deposit Insurance Corporation) and Michael Barr (vice chairman for supervision at Federal Reserve) will both be present at the hearing. There are more witnesses who could be called before the hearing.

Lawmakers are already pressing for answers about the bank failures. Senators on the Finance Committee questioned Treasury secretary Janet Yellen during a separate hearing concerning her proposed budget for 2024.

Sen. Sherrod (D-OH), sent a Thursday letter to the Treasury and the Fed, requesting they conduct a comprehensive examination of the bank’s collapse, which caused a strain on the country’s financial system. Brown asked the agency to adopt stronger banking regulations as part of this request “to prevent failures and mitigate contagion.”

This hearing is being held as lawmakers from both sides of the aisle attempt to resolve the collapse of Signature Bank and SVB, which caused a frenzy on the stock market last week.

Senator Elizabeth Warren (D. MA) introduced legislation Tuesday that would eliminate Title IV of Economic Growth, Regulatory Relief and Consumer Protection Act and restore some provisions used to reform the U.S. Financial System in the wake of the 2008 crisis.

Warren’s legislation specifically targets Title IV provisions that raise the asset threshold to $250B for banks to regulate as “systemically important.” Warren argued that this rollback led to deregulation and the subsequent collapse of Signature Bank and SVB, causing the panic and strain on stock markets.

As the senators disagree on whether to repeal the 2018 legislation entirely or adopt stronger regulations, there has been some disagreement among Senate Democrats. Republicans on the other side have rejected the idea.

Senate Minority Whip John Thune(R-SD), dismissed any discussion of legislation as being “premature,” Even more so, before legislators understand the causes of the collapse.

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SVB and Signature Bank both collapsed last week. Federal intervention was necessary to stop panic by providing financial support to uninsured deposits.

SVB had announced that it had sold $21billion of bonds on March 8, cementing $1.8billion in losses previously unrealized. That announcement sparked a frenzy among venture capital firms, which reportedly began advising clients to pull their money from Silicon Valley Bank — causing its stock to be thrust into a free fall.