Warren goes off on Jerome Powell during Senate Finance hearing: He aimed a ‘flamethrower’ at banking rules
Elizabeth Warren on Thursday blamed Federal Reserve Chair Jerome Powell and lawmakers who enabled him for relaxing regulations that she said led to Silicon Valley Bank’s collapse last week.
The second-largest bank collapse in U.S. history prompted the U.S. government to protect all depositors, including those over the FDIC’s $250,000 limit.
Warren made her comments during a Senate Finance Committee hearing on President Joe Biden’s Fiscal Year 2024 budget. Treasury Secretary Janet Yellen appeared before the committee Thursday.
“I am grateful for the administration’s steady hand, but we shouldn’t have had to be here in the first place,” Warren initially said before taking aim at Powell and lawmakers on both sides of the aisle for lifting regulations enacted in the aftermath of the 2008 financial crisis.
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“These bank failures were the direct result of policymakers decisions over the last five years, beginning with the 2018 law signed by President Trump with the support of both parties to weaken the regulations that had been put in place after the 2008 financial crisis to ensure big banks never again crash our economy.”
Warren then unloaded on Powell, who the senior senator from Massachusetts accused of shredding banking rules intended to protect small and mid-size banks from the scenario that unfolded last week at SVB.
“Over the last few days, we have heard a lot of Republicans say this collapse wasn’t their fault, that it was the banking regulators who were asleep at the wheel – and believe me, I have questions for a lot of the banking regulators – but Congress handed Chair Powell the flamethrower that he aimed at the banking rules. In fact, he said so himself,” Warren said.
The progressive Democrat urged her Senate colleagues to reenact the regulations that were lifted during the Trump administration.
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“When he announced he was weakening regulations for the banks like SVB, Chair Powell said, ‘in the rules before us we are applying discretion granted to us by the economic growth regulatory relief and consumer protection act.’
“Translation: Congress opened the door to weaker regulations and I’m waltzing right through it.
“That’s true and Congress needs to close that door.”
SVB -- the United States' 16th-biggest bank by assets and a key lender to startups in the country since the 1980s -- collapsed after a sudden run on deposits, prompting regulators to seize control on Friday.
On Sunday, the Treasury, Fed, and Federal Deposit Insurance Corporation (FDIC) set out plans to ensure SVB customers would be able to access their deposits, while the Fed introduced a new lending tool for banks in an effort to prevent a repeat of SVB's quick demise.
"We felt that there was a serious risk of contagion that could have brought down and triggered runs on many banks," said Yellen of the situation.
But such intervention required a decision involving top officials -- a majority of the FDIC board, supermajority of the Fed board, and Yellen herself in consultation with the US president.
They had to "determine that the failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences," Yellen said.
SVB had a high reliance on uninsured deposits, and there was a massive withdrawal of deposits that led to liquidity problems.
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With additional reporting by AFP
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