Twelve Democratic lawmakers led by Sen. Elizabeth Warren (D-Mass.) are escalating criticisms of the U.S. banking sector and calling on the Federal Reserve to implement tighter regulations and oversight for some of the country’s major institutions.
In the wake of Silicon Valley Bank and Signature Bank’s failures, Warren wrote to regulators urging them to add new guidelines and increase mandatory inspection for banks operating with at least $100 billion in assets.
“The fall of both SVB and Signature, the near-crash of First Republic, and the struggles of other regional banks shed new light on the systemic importance of banks with assets totaling between $100 and $250 billion,” Warren and other Democratic senators wrote in a memo, first reported by CNN, and also obtained by The Hill.
The letter dated on Tuesday was addressed to Michael Barr, the vice chair of supervision at the Fed, who is one of progressives’ top figures to watch in the ongoing investigation into the sudden financial crisis.
Warren was joined by other key progressives, including Sens. Bernie Sanders (I-Vt.), Ed Markey (D-Mass.), Tammy Duckworth (D-Ill.), Brian Schatz (D-Hawaii), and a handful of moderate Democrats calling for stricter rules.
The senators jointly called the latest actions by senior banking leaders that led to the collapse “irresponsible.”
“In response to SVB’s and Signature Bank’s failures, the Department of Treasury, after consultation with the Fed and the Federal Deposit Insurance Corporation (FDIC), approved ‘systemic risk exceptions’ allowing the FDIC to fully compensate the banks’ depositors, including those holding deposits above the $250,000 FDIC insurance threshold,” Warren wrote alongside her colleagues. “In making this determination, regulators acknowledged the systemic significance of banks of this size, and that their failure could have significant spillover effects on the broader banking system.”
The request was the latest in a series of public efforts Warren has made to signal the dangers of easing regulatory practices for banks. Last week, she co-led legislation called the Secure Viable Baking Act alongside Rep. Katie Porter, a progressive congresswoman running for Senate in California. She also recently wrote an op-ed in the New York Times offering an assessment of who is to blame and how regulators and lawmakers can avert a similar debacle.
“Irresponsible and excessive risk taking by SVB and Signature executives should serve as a clear reminder that banks cannot be left to supervise themselves,” she wrote. “The Fed has a responsibility to ensure financial stability, and in order to fulfill that responsibility, it must ensure that all banks with potential systemic significance are subject to rigorous safety and soundness rules.”