Lawmakers keep up pressure on regulators a year after SVB's fall

Bloomberg News

WASHINGTON — Almost  exactly a year after the failure of Silicon Valley Bank, two lawmakers from opposing sides of the aisle have offered different criticisms of regulators responses to the crisis. 

Sen. Bill Hagerty, R-Tenn., sent a letter on Sunday asking Federal Deposit Insurance Corp. Chairman Martin Gruenberg about its sale of part of the loan portfolio of Signature Bank, which failed a few days after Silicon Valley Bank and received a systemic risk exception from federal regulators. 

Hagerty suggested that the bid chosen by the FDIC might not have been the highest offer submitted. The FDIC is required to choose the least costly offer to the deposit insurance fund, which is the pot of money that the FDIC uses to resolve failed banks. 

"My concerns about this sale are heightened by the level of political attention it has attracted," he said. 

Hagerty cited a letter from New York City Mayor Eric Adams to the FDIC endorsing the bid submitted by Related Fund Management, which eventually won out among other competing bids. 

"Under no circumstances should a bid be selected because it is politically favored or because a bidder — in this case, Community Preservation Corp. — professes commitments to progressive political causes," he said. 

On the same day, Sen. Elizabeth Warren, D-Mass., wrote a letter to all three prudential banking regulators, urging them to tighten capital and liquidity requirements, stress tests and resolution planning for banks with more than $100 billion in assets.

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Particularly, Warren said she's concerned about the large regional bank category, which saw their requirements somewhat loosened with a 2018 law that allowed regulators to tailor capital requirements for banks in the $100 billion to $250 billion asset range. 

After the failure of Silicon Valley Bank, President Joe Biden urged bank regulators to reinstate some of the requirements that previous administrations rolled back. 

"I strongly support your agencies' work to finalize the Basel III rule to strengthen capital requirements for the biggest banks," Warren said. "In addition to this effort, I also urge you to follow through on the commitments you made in March 2023 to implement President Biden's request for stronger capital and liquidity requirements, stress tests, and resolution planning for banks with at least $100 billion in assets."