WASHINGTON, D.C.— Dennis M. Kelleher, Co-founder, President, and CEO, issued the following statement in connection with the upcoming report by the Federal Reserve on the causes of the collapse of Silicon Valley Bank:
“The report that the Vice Chair for Supervision (VCS) at the Federal Reserve Board (Fed) is scheduled to release by next Monday into what happened at Silicon Valley Bank (SVB) will be a momentous and consequential event. That’s not just because the public deserves to know how the 16th largest bank in the U.S. could collapse so quickly, unexpectedly, and expensively while supposedly being supervised and regulated by the Fed. It’s also because it will be an acid test for the power, authority, and independence of the VCS.
“The VCS position was a major reform created by the Dodd Frank Act to address, in part, the many deep and consequential failures of the Fed in the years leading up to the 2008 financial crash. It was designed by statute to be both powerful and independent, but the position has never been tested. Until now. That’s why the actions of the VCS regarding the SVB report may well determine the future of that position.
“While the directors, executives, and officers of SVB are at the top of the hierarchy of those who deserve blame, there is no doubt that the Fed’s deregulation and gutting of supervision (as detailed in this Fact Sheet) was a major contributor and cause of SVB’s collapse. If the report fully and directly details those actions and failings of the Fed and specifically identifies who at the Fed Board did what to cause or contribute to the collapse, then it will establish a strong precedent that the position of VCS will achieve its statutory mandate and mission to be both powerful and independent. Anything less, then the Report will be a clear indication that the VCS is subordinate to the Chair just like everyone else at the Fed. That will gut a key reform of the Dodd Frank Act.
“Unfortunately, events thus far have not been promising. First, the Fed announced that it would investigate itself rather than calling for a truly independent, outside investigation. As has been proved in the past, the Fed’s so-called self-investigations are incomplete and biased, predictably leading to unwarranted self-exoneration. Second, Chair Powell, rather than the VCS, announced that the VCS would be undertaking the investigation. Third, the Chair put the VCS on a very short leash, giving him merely six weeks to do what the Chair brazenly referred to as a ‘thorough’ and ‘transparent’ review. However, no genuinely thorough, comprehensive, and unbiased review of such a major event would have been put on such a short deadline, which clearly suggests other motives. Finally, the innumerable, unprecedented, and illegal leaks of highly confidential supervisory information in the weeks after the failure of the SVB makes clear that at least some are more interested in finding scapegoats and avoiding responsibility for their actions than getting to the truth (detailed in the Fact Sheet at pps. 7-8).
“We know VCS Barr. He is incredibly knowledgeable and experienced. He has the capacity and the position to release a report that establishes a clear precedent that the position of VCS is in fact as powerful and independent as the law intended it to be. We look forward to that report setting that precedent.”
For more information, visit our webpage on the “Silicon Valley Bank Failure: Accountability and the Path Forward” here.
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