As Congress looks to pin blame for the collapse of Silicon Valley Bank, both Republicans and Democrats say it looks like regulators at the Federal Reserve fell down hard on their job.

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As Congress looks to pin blame for the collapse of Silicon Valley Bank, both Republicans and Democrats say it looks like regulators at the Federal Reserve fell down hard on their job.

Lawmakers are asking how examiners at the Federal Reserve Bank of San Francisco, which was in charge of supervising SVB, failed to spot signs of trouble that later sparked a run by its depositors. They note that the issues were readily visible on SVB’s public financial statements, and drew attention from short-sellers months before. Making the optics worse: SVB’s CEO sat on the San Francisco Fed’s board until Friday.

“The San Francisco Fed had all the tools necessary to prevent the collapse from happening,” Tennessee Republican Sen. Bill Hagerty tweeted Tuesday. “From an oversight standpoint, we need to understand why the SF Fed wasn’t utilizing all these tools at its disposal.”

Hagerty was one of several GOP members of the Senate Banking Committee who criticized the regulator on Tuesday. A spokesman for North Carolina Sen. Thom Tillis told Semafor “it appears the San Francisco Fed was asleep at the helm.” Ohio Sen. J.D. Vance told Fox: “I don’t know why they didn’t see this coming … this is their job, to see impending bank failures within their portfolio.”

Republican members of the House Financial Services Committee also singled out the San Francisco Fed for blame during a call with their colleagues Monday night.


Sen. Elizabeth Warren, D-Mass., who has long criticized Federal Reserve Chair Jerome Powell’s record on banking regulation, accused him of letting institutions like SVB “boost their profits by loading up on risk directly contribut[ing] to these bank failures.” Other Democrats have been somewhat quieter with their criticism, but still raised questions. “Where were the regulators?” Sen. Mark Warner, D-Va. asked on Tuesday when approached by Semafor.

The Fed, for its part, announced on Monday that it was launching a review of how it regulated SVB. “We need to have humility, and conduct a careful and thorough review of how we supervised and regulated this firm, and what we should learn from this experience,” Vice Chair for Supervision Michael Barr said in a statement.

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Lawmakers aren’t just grandstanding: It really does look like the Fed’s regulators may have failed at their most basic job when it comes to SVB, which is to monitor the banking system for safety.

Progressives have blamed a bipartisan banking deregulation bill that Donald Trump signed in 2018 for loosening the rules on large regional banks like SVB. But according to Dennis Kelleher, head of the financial regulation advocacy group Better Markets, the Fed’s supervisors still had the power to stop the bank from taking too many risks, if they’d been paying attention. ”The federal reserve failed miserably here,” he said. “This crash was foreseeable and avoidable.”

Advocates for stricter financial regulation have noted that Randal Quarles, who served as the Fed’s supervision chief under Donald Trump, sought to ease up on bank oversight (or change “the tenor” as he put it). The SVB debacle could force it to become more stringent again.


At the same time, attacking the Fed is also politically convenient for just about everyone in this debate — whether they fall on the right, left, or center.

For conservatives, the Fed’s apparent fumble is a good excuse to oppose additional banking rules. “Regulators failed to do their job with regards to SVB,” a spokesman for South Carolina Sen. Tim Scott, the ranking Republican on the Senate Banking Committee, told Semafor. “If regulators can’t do their job with what the law gives them now, why is giving them more regulations the better route?”

Progressives like Warren, on the other hand, are enjoying a bit of an I-told-you-so-moment, after opposing Powell’s renomination as Fed Chair largely because of his support for the Fed’s efforts to pare back banking regulation under Trump. Many argued that it was only a matter of time before another bust, and now here we are.

As for the centrists? Many moderate Democrats, including Warner, are facing tough questions for backing the 2018 bank deregulation bill. If Fed failure is seen as the real culprit, that takes the heat off of their vote.

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Not everyone in Washington is ready to blame the San Francisco Fed just yet. Asked if regulators fell down on the job, Senate Banking Committee Chair Sherrod Brown said, “I don’t know. That’s why I want to do hearings.”

— Joseph Zeballos-Roig contributed to this article.


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