WASHINGTON, D.C.— Dennis M. Kelleher, Co-founder, President, and CEO, issued the following statement in connection with the Federal Reserve Board’s (Fed) release of a report by the Vice Chair for Supervision Michael Barr on the causes of the collapse of Silicon Valley Bank (Report):

“The Fed Vice Chair for Supervision (VCS) and his team deserve credit for completing a significant review in an inappropriately short period of time, but they must act with more urgency and speed to fix the many identified problems than currently contemplated.  As the Report makes clear, SVB’s failure and the ongoing banking crisis were the predictable and predicted result of decisions and actions by elected officials and regulators to deregulate the financial industry.  After all, it’s not like banking regulators and supervisors just woke up one morning and decided to stop properly regulating and supervising the banks and bankers.

“Multiyear rulemakings, as the Report proposes, to fix glaring, well-known risks that have in fact materialized into multiple bank failures are not only inadequate but may also be unsuccessful given the financial industry’s ceaseless efforts to protect that deregulation.  As SVB proves, that deregulation enables them to continue to engage in dangerous and high-risk activities that generate billions in bonuses and compensation for them while threatening the financial system and economy.  Moreover, the known risks will continue to metastasize, and new risks will emerge, all overtaking if not defeating a multiyear rulemaking effort.  Finally, the industry is incentivized to inappropriately bog down the rulemaking process as much as possible while it funds candidates in the upcoming 2024 elections who will promote bankers’ interests over the public’s interests.

“With three banks already failed, more than $20 billion in losses already incurred, and at least one additional major regional bank failure imminent, the Fed and other banking regulators must act as quickly to prevent another crash as they act once one happens.  In addition to immediately bolstering supervision, they should quickly announce interim final rules, based on ample records previously assembled and recognition of changed facts and circumstances, to increase capital, liquidity, stress testing, living wills, and other essential financial protections.  Moreover, the Financial Stability Oversight Council (FSOC) should do the same for systemically significant nonbanks, which are currently also insufficiently regulated and supervised, posing unacceptable risks to the financial system and economy.

“After all, the Report, in effect says that if you take the cops off the city streets in a high crime neighborhood, then there’s going to be lots more lawbreaking.  That’s essentially what happened in the banking and financial industries starting in 2017 and throughout the Trump administration: deregulation and weakened supervision incentivized financiers to take more risks which inevitably led to recklessness, failures, and crisis.

“It is no mystery how to address these failures: put the regulatory cops back on the finance beat and make sure they have the tools, powers, and authorities necessary to rein in inappropriate risk taking and recklessness.  The fact that those risks, and the actions necessary to reduce them, have been widely known for a very long time fully supports the Fed and other banking agencies taking swift action.  As the banking crisis continues, with more banks likely fail and a worsening credit contraction, the American people have already suffered enough from baseless and unwarranted deregulation.  The time to act is now; the American people deserve no less.”

For more information, visit our webpage on the “Silicon Valley Bank Failure: Accountability and the Path Forward” here.

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.