SVB collapse: Sherrod Brown presses federal government to strengthen banking regulations

Sen. Sherrod Brown (D-OH), is asking the federal government to investigate Silicon Valley Bank’s collapse and strengthen banking safeguards to prevent similar incidents in the future.

On Thursday, the Ohio senator wrote a letter to Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation, asking them to review the collapse of the bank that caused financial stress in the country. The Fed and FDIC are already conducting routine investigations into the failures. This request calls for the departments to continue these efforts. “identify any broader vulnerabilities in the banking system.”

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“While we are still understanding the full scope of these failures, several factors contributing to their demise have come to light,” The senator wrote. “These banks were over-concentrated and over-reliant on particular industries and operated with an exorbitantly high percentage of uninsured deposits. Furthermore, the banks also lacked adequate risk management.”

Brown asked government leaders to examine a variety of issues that could have led to the bank’s failure, including any role that social media may have played. “accelerating the failures.” Ohio Democrat also demanded a review of state and federal regulators’ deficiencies that could have contributed in any way to the crisis.

“I urge you to … hold those responsible for these bank failures accountable for their actions, including by clawing back executive bonuses and compensation and taking other appropriate regulatory actions to hold these banks’ executives accountable,” He wrote.

Brown also called on the agencies to enforce stronger regulations for the banking sector.

“You must strengthen the guardrails for banks to prevent failures and mitigate contagion and panic risks to protect consumers and small businesses and to preserve small banks and credit unions on Main Street,” He added.

The letter comes as lawmakers from both parties seek to address SVB’s collapse and Signature Bank’s failure, which has caused chaos and strain on the national stock exchange.

Senator Elizabeth Warren (D.MA) introduced Tuesday legislation that would repeal Title IV of Economic Growth, Regulatory Relief and Consumer Protection Act and reinstate certain provisions used in order to rebuild the U.S. financial sector after the 2008 recession.

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 the rollback caused the deregulation of Signature Bank and SVB and led to their collapse, which in turn caused the market turmoil and increased stress.

Sen. Democrats are having a hard time agreeing on the bill. They don’t know whether to repeal 2018 legislation or make stronger regulations. Republicans on the other side have rejected the idea.

Senate Minority Whip John Thune, R-SD, dismissed any talk of legislation as being “premature,” Even more before lawmakers can understand the reasons behind 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 Wednesday that it had sold $21billion of bonds to secure $1.8billion in losses. 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.