Elizabeth Warren calls for Federal Reserve System probe and blames weakening ... trends now
Senator Elizabeth Warren is calling for an independent investigation into the Federal Reserve System following the collapse of Silicon Valley Bank (SVB) and Signature Bank.
SVB and Signature Bank invested their clients deposits in higher-yield, long-term mortgage-backed securities and bonds with pandemic-era low interest rates.
But the value of those assets dropped significantly when the Fed hiked rates earlier this month.
Warren believes weakened regulatory processes are responsible for the cause of the banks collapse and the risk posed to other banks.
A new study published on the Social Science Research Network found nearly 200 other US banks are also at at risk of failing should their depositors make a run on their holdings.
Democratic Senator Elizabeth Warren is pushing for an investigation into the Federal Reserve System that caused collapse of Silicon Valley and Signature Banks
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A large holding of the banks assets are being held in interest-rate sensitive financial instruments such as government bonds and mortgage-backed securities.
Warren, who sits on the Senate Banking Committee, said the problem began in 2016 when large banks lobbied to have regulations eased.
They argued that they were similar to smaller banks and needed to have the same regulations applied to them.
'Let me describe what I see as the problem; starting back in 2016 or so, these multi-billion dollar banks like SBV … came to Washington and kept saying 'lighten the regulations on us. We're just like tiny little banks, so ease up on the regulations,'' Warren said on ABC's This Week.
'Donald Trump then ran for president promising he would ease up on the regulations on these multi-billion banks. He then was elected president and he put in a lot of regulators who eased up on banking regulations.'
SVB was the nation's 16th largest bank and its collapse is the largest lender failure since the 2008 financial crisis
Warren explained how in 2018, Congress passed a regulation rollback for the banking industry, which resulted in increased risk-taking by banks, short-term profits, and large bonuses and salaries for executives.
'What happened is what we should have predicted,' Warren explained.
'These banks … loaded up on risk, they boosted their short term profits, they gave themselves huge bonuses and big salaries and they exploded their banks,' the senator said.
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